Demand deposit constitutes money in the modern economy.

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Detailed Solution

The above statement is true.
Bank deposits are the deposits accepted by the bank from the general public. Interest is paid by the bank on these deposits. As these can be withdrawn by a citizen as and when he demands, they are called "demand deposits." Demand deposits are considered money in the modern economy because they are widely accepted as a means of payment along with currency. Nowadays, payments are made in cheques too. Cheques are papers instructing a particular bank to pay a certain amount from a person's account to another person. Thus, cheques also serve as a medium of exchange.

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