Chapter 5R, Problem 14MCQ

To determine

The correct option that refers to liquid assets kept in the bank’s vault.

Answer to Problem 14MCQ

Option c is correct.

Explanation of Solution

Explanation for the correct option:

c.

Banks keep some percentage of their total deposit in a bank vault in the form of cash as per the banking guidelines. It can be referred to as reserves. Therefore, option c is correct.

Explanation for incorrect options:

a.

Deposits refer to the total amount that is safely stored by the bank deposited by the depositor. Banks keep a certain proportion of the deposited amount rest amount is invested or lent to others. Therefore, option a is incorrect.

b.

Banks provide various types of accounts facilities depending upon the type of investors or depositors. Therefore, option b is incorrect.

d.

Money is the medium of exchange through which goods and services can be traded. Therefore, option d is incorrect.

e.

Returns refer to the income that is earned by the depositors for allowing banks to use their capital for a certain period of time. Therefore, option e is incorrect.

Economics Concept Introduction

Liquid assets: Assets that can be converted into cash or cash equivalents in a very short span of time are referred to as liquid assets.