Definition of Demand deposits

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.

Negotiable order of withdrawal (NOW)

demand deposits that pay interest.

Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Demand master notes

Short-term securities that are repayable immediately upon the holder's demand.

Demand shock

An event that affects the demand for goods in services in the economy.

Hedging demands

demands for securities to hedge particular sources of consumption risk, beyond the usual
mean-variance diversification motivation.

Money market demand account

An account that pays interest based on short-term interest rates.

Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.

Savings deposits

Accounts that pay interest, typically at below-market interest rates, that do not have a
specific maturity, and that usually can be withdrawn upon demand.

Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.

Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.

Variable rated demand bond (VRDB)

Floating rate bond that can be sold back periodically to the issuer.

Aggregate Demand

Total quantity of goods and services demanded.

Aggregate Demand Curve

Combinations of the price level and income for which the goods and services market is in equilibrium, or for which both the goods and services market and the money market are in equilibrium.

Demand

An amount desired, in the sense that people are willing and able to pay to obtain this amount. Always associated with a given price.

Demand Deposit

A bank deposit that can be withdrawn on demand, such as a deposit in a checking account.

Demand Management Policy

Fiscal or monetary policy designed to influence aggregate demand for goods and services.

Demand-Pull Inflation

Inflation whose initial cause is excess demand rather than cost increases. See also cost-push inflation.

Excess Demand

A situation in which demand exceeds supply.

Warehouse demand

The demand for a part by an outlying warehouse.

Demand Loan

A loan which must be repaid in full on demand.

Insured Retirement Plan

This is a recently coined phrase describing the concept of using Universal Life Insurance to tax shelter earnings which can be used to generate tax-free income in retirement. The concept has been described by some as "the most effective tax-neutralization strategy that exists in Canada today."
In addition to life insurance, a Universal Life Policy includes a tax-sheltered cash value fund that cannot exceed the policy's face value. deposits made into the policy are partially used to fund the life insurance and partially grow tax sheltered inside the policy. It should be pointed out that in order for this to work, you must make deposits into this kind of policy well in excess of the cost of the underlying insurance. Investment of the cash value inside the policy are commonly mutual fund type investments. Upon retirement, the policy owner can draw on the accumulated capital in his/her policy by using the policy as collateral for a series of demand loans at the bank. The loans are structured so the sum of money borrowed plus interest never exceeds 75% of the accumulated investment account. The loans are only repaid with the tax free death benefit at the death of the policy holder. Any remaining funds are paid out tax free to named beneficiaries.
Recognizing the value to policy holders of this use of Universal Life Insurance, insurance companies are reworking features of their products to allow the policy holder to ask to have the relationship of insurance to investment growth tracked so that investment growth inside the policy may be maximized. The only potential downside of this strategy is the possibility of the government changing the tax rules to prohibit using a life insurance product in this manner.

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