Demand deposit

Simply put, these are deposits in the bank that can be withdrawn on demand, without any prior notice.

Demand deposits are usually considered part of the narrowly defined money supply, as they can be used, via checks and drafts, as a means of payment for goods and services and to settle debts.

The money supply of a country is usually defined to consist of currency plus demand deposits.

[1] During times of financial crisis, bank customers will withdraw their funds in cash, leading to a drop in demand deposits and a shrinking of the money supply.

Economists have speculated that this effect contributed to the severity of the Great Depression.