Concept:
- A demand deposit gets its name from one of these two statements and its usefulness as money from the other, so both describe real features of the same thing.
- Checking each against everyday banking makes this clear.
Step 1: Check Statement I against the name itself.
The term demand deposit means a deposit repayable on demand. A savings or current account holder can walk into a branch, or use an ATM, and take out the money without giving notice.
The statement is simply the definition of the term, so it is correct.
Step 2: Check Statement II against how payments are made.
When a buyer pays a seller by cheque, the bank debits the account of the buyer and credits that of the seller. The transaction is settled although not a single note or coin moved.
The statement is therefore correct as well.
Step 3: See why both features matter together.
A deposit that could not be withdrawn freely would not serve as money, and one that could not be used to pay others would be no better than a locked box. Demand deposits have both properties, which is why they are counted as money.
Step 4: Reject the remaining options.
Options (A) and (B) each reject one true statement, and option (D) rejects both. Only option (C) accepts both.
Final Answer: (C) Both Statement I and Statement II are correct.