Difference between primary and derivative deposit
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Consider an initial deposit at a commercial bank. Because of this deposit (called a primary deposit), the bank is holding currency. To make a profit for its investors, the bank loans this money out. The person that gets the loan spends the money which will eventually be deposited in a bank. This second deposit is refered to as a derivative deposit or secondary deposit. Any of these additional derivative deposits increase the amount of the money supply.
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Primary deposit: are cash deposit with the commercial banks by the people.
Secondary deposit : are those deposits which arise on account of loans by the banks to the people.
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