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how demand deposits work | if depositors were required to notify their banks in advance before withdrawing funds it would be quite a challenge to obtain cash or make mundane transactions demand deposit accounts are intended to provide ready money the funds that people need to make a purchase or pay bills the account s holdings can be accessed at any time without prior notice to the institution the account holder simply walks up to the teller or the atm or increasingly goes online and withdraws the sum they need as long as the account has that amount the institution has to give it to them the money is available on demand hence the name demand deposit for this sort of account demand deposit accounts which typically are offered by banks and credit unions are in contrast to investment accounts offered by brokerages and financial services firms while the funds may be invested in highly liquid assets the account holder still must notify the institution that they wish to withdraw money depending on the asset in question it may take a day or two for the investments to be sold and the cash to be available dda can also mean direct debit authorization which is a withdrawal from an account for purchasing a good or service it s what happens when you use a debit card but it s fundamentally the same concept the money is immediately available drawn on the linked account for your use special considerationsdemand deposit accounts ddas may have joint owners both owners must sign when opening the account but only one owner must sign when closing the account either owner may deposit or withdraw funds and sign checks without permission from the other owner some banks create minimum balances for demand deposit accounts accounts falling below the minimum value typically are assessed a fee each time the balance drops below the required value however many banks now offer no monthly fees and no minimum balances types of demand deposit accounts ddas ddas are primarily checking accounts but they can include savings accounts as well money market accounts mmas are a bit of a gray area some financial authorities classify them as ddas some don t demand deposits make up most of a particular measure of the money supply m1 this is the sum of all of a nation s demand deposits plus all the currency in circulation it s a measure of the most liquid types of money in the money supply 1as of may 2022 the total amount of demand deposit accounts in the u s officially the total demand deposits component of m1 was 4 98 trillion this compares to 1 4 trillion five years ago and 733 billion 10 years ago 2requirements for demand depositsthe key requirements of ddas are no limitations on withdrawals or transfers no set maturity or lockup period funds accessible on demand and no eligibility requirements the payment of interest and the amount of interest on the dda are up to the individual institution once upon a time banks could not pay interest on certain demand deposit accounts for example the federal reserve board s regulation q req q enacted in 1933 specifically prohibited banks from paying interest on checking account deposits many banks got around that rule via negotiable order of withdrawal now accounts checking accounts with a temporary holding period on funds which allowed them to actually pay some interest reg q was repealed in 2011 3still ddas tend to pay relatively low interest rates on savings accounts no interest at all as is often the case with checking accounts reg q s repeal notwithstanding they may also charge various fees for handling the account demand deposit vs term deposita demand deposit account and a term deposit account are both types of financial accounts offered by banks and credit unions but they differ in terms of accessibility or liquidity and in the amount of interest that can be earned on the deposited funds basically a dda allows funds to be accessed anytime while a term deposit account also known as a time deposit account restricts access to funds for a predetermined period funds cannot be withdrawn from a term deposit account until the end of that term without incurring a financial penalty and withdrawals often require written notice in advance the most familiar type of term deposit account is the certificate of deposit cd you buy the cd for a set term or time period a certain number of months or years and you generally don t touch it until the term is up it sits in a special account earning interest at a fixed rate that interest is the second big thing distinguishing demand deposits from term deposits term deposits offer interest rates that are generally higher ddas much closer to prevailing market rates that s basically the trade off in return for the ability to access your funds on demand your money earns less in a dda the time deposit pays more in compensation for its lack of liquidity | |
what does dda mean on a bank statement | the acronym dda stands for demand deposit account indicating that funds in the account usually a checking or regular savings account are available for immediate use on demand so to speak dda can also stand for direct debit authorization meaning a transaction such as a transfer cash withdrawal bill payment or purchase which has immediately subtracted money from the account | |
what is a consumer dda account | a consumer dda is a demand deposit account such an account lets you withdraw funds without having to give the financial institution any advance notice | |
what is the difference between demand deposits and time deposits | demand deposits consist of funds the account holder can access right away such as checking account funds in contrast time deposits or term deposits are locked for a certain period of time such as certificates of deposit cds | |
what are the advantages of demand deposit accounts | with demand deposit accounts the funds are always readily available you can withdraw the funds in form of the cash or to pay for something using a debit card or online transfer at any time without giving the bank notice or incurring a penalty or paying fees they offer the utmost convenience for getting cash or transferring funds to another account or another party the bottom lineoffered by banks and credit unions demand deposit accounts allow you to deposit to and withdraw funds immediately whenever you want on demand in effect the financial institution can t require advance notice or charge a fee for letting you access the funds ideal for frequent or everyday needs ddas usually take the form of checking or savings accounts the main drawback of ddas is that they offer little or no interest in the money in them that s the price you pay for the funds being readily available | |
what is a demand draft | a demand draft is a method used by an individual to make a transfer payment from one bank account to another demand drafts differ from regular normal checks in that they do not require signatures to be cashed in 2005 due to the increasing fraudulent use of demand drafts the federal reserve proposed new regulations increasing a victim s right to claim a refund and holding banks more accountable for cashing fraudulent checks understanding demand drafts | |
when a bank prepares a demand draft the amount of the draft is taken from the account of the customer requesting the draft and is transferred to an account at another bank the drawer is the person requesting the demand draft the bank paying the money is the drawee the party receiving the money is the payee demand drafts were originally designed to benefit legitimate telemarketers who needed to withdraw funds from customer checking accounts using their bank account numbers and bank routing numbers | for example if a small business owner purchases products from another company on credit the small business owner asks his bank to send a demand draft to the company for payment of the products making him the drawer the bank issues the draft making it the drawee after the draft matures the owner of the other company brings the demand draft to his bank and collects his payment making him the payee because a demand draft is a prepaid instrument payment cannot be stopped whereas payment of a check may be denied for insufficient funds process of obtaining demand draftto obtain a demand draft choose the issuing bank or financial institution from which you want to obtain the draft if you re not an account holder visit the bank branch and provide additional identification and documentation you ll often have to fill out an application form with the required details including the amount to be paid the name of the payee and other relevant information the bank often asks you to provide supporting documents such as proof of identification and address this complies with know your customer kyc regulations after you pay the required fees you ll receive the demand draft in your name with a unique draft number printed on special security paper | |
when you receive the demand draft check the demand draft details ensure all information is correct including the payee s name amount and instructions to ensure they match your requirements from there all that s left is to deliver the demand draft to the payee depending on your preference and bank s policies | demand drafts vs other payment methodsa demand draft is issued by a bank while a check is issued by an individual also a demand draft is drawn by an employee of a bank while a check is drawn by a customer of a bank payment of a demand draft may not be stopped by the drawer as it may with a check although a check can be hand delivered this is not the case with a demand draft the draft may be drawn regardless of whether an individual holds an account at the bank while a check may be written only by an account holder a demand draft is a physical payment instrument issued by a bank or financial institution representing a guaranteed form of payment as the purchaser pre pays the funds on the other hand a wire transfer also known as a bank transfer or electronic funds transfer eft involves the electronic transfer of funds from one bank account to another the processing time for a demand draft may vary depending on factors such as the issuing bank and delivery method however wire transfers are generally faster than demand drafts often completed within hours or minutes this allows for swift transfer of funds banks typically charge a fee for issuing a demand draft which may vary depending on the bank and the amount of the draft additional charges may apply for services such as courier delivery wire transfers usually also involve transaction fees which can vary depending on the banks involved the transfer amount and whether it is domestic or international demand drafts are commonly used for secure transactions such as large amounts educational fees property purchases or settling financial obligations this is the case where substantiation and secure payment delivery are highly important though wire transfers may also be used in this case wire transfers are a more versatile form of payment that includes regular daily transactions of lower importance contact your bank immediately if your demand draft is lost or stolen online payment systems are digital platforms that facilitate electronic transactions over the internet allowing individuals and businesses to make payments or transfer funds between bank accounts or digital wallets without the need for physical instruments compared to demand drafts online payment systems typically offer faster processing times allowing transactions to be completed in real time while demand drafts often incur transaction fees more and more online payment systems may also offer free transactions for certain transfers or within specific limits this may be free transactions based on the number of quantities or free transactions based on the size of the transaction consider how popular shopping websites can easily facilitate online payments for free online payment systems have gained significant popularity worldwide used for various transactions including e commerce purchases bill payments peer to peer transfers and subscription services as noted above with wire transfers demand drafts may be more suitable for more select types of transactions as opposed to online payments which may be used much more broadly | |
how long does it take for a demand draft to clear | the clearing time for a demand draft can vary depending on factors such as the banks involved and the method of presentation it typically takes several business days for the demand draft to clear and for the funds to become available to the payee the exact time frame can depend on the policies and processes of the banks involved | |
what fees and charges are associated with demand drafts | fees associated with demand drafts include an issuance fee charged by the bank for providing the draft additionally there may be additional charges for services like courier delivery if the draft needs to be sent to the payee through postal services or courier the fees can vary between banks so check with your bank for the specific charges can i cancel or stop a demand draft yes demand drafts can generally be canceled or stopped by the purchaser if a demand draft needs to be canceled the purchaser should contact the issuing bank immediately and provide the necessary details the bank will guide the purchaser through the cancellation process which may involve submitting a written request and paying cancellation fees | |
what should i do if my demand draft is lost or stolen | if a demand draft is lost or stolen it is crucial to take immediate action contact the issuing bank and provide them with all relevant details the bank will guide you through the necessary steps to report the loss or theft this typically involves submitting a written request providing any supporting documents and cooperating with the bank s investigation process to resolve the issue the bottom linea demand draft is a secure payment instrument issued by a bank that guarantees the availability of funds it involves the bank deducting the draft amount from the purchaser s account and setting aside the funds when presented for payment the funds are transferred to the payee s account demand drafts offer security wide acceptance and convenience for both parties they can be obtained from banks by filling out an application form providing documentation and paying an issuance fee | |
when producing goods and services businesses require labor and capital as inputs to their production process the demand for labor is an economics principle derived from the demand for a firm s output that is if demand for a firm s output increases the firm will demand more labor thus hiring more staff and if demand for the firm s output of goods and services decreases in turn it will require less labor and its demand for labor will fall and less staff will be retained | labor market factors drive the supply and demand for labor those seeking employment will supply their labor in exchange for wages businesses demanding labor from workers will pay for their time and skills breaking down demand for labordemand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time this demand may not necessarily be in long run equilibrium it is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage a profit maximizing entity will command additional units of labor according to the marginal decision rule if the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost the firm will increase profit by increasing its use of labor it will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor this relationship is also called the marginal product of labor mpl in the economics community other considerations in demand for laboraccording to the law of diminishing marginal returns by definition in most sectors eventually the mpl will decrease based on this law as units of one input are added with all other inputs held constant a point will be reached where the resulting additions to output will begin to decrease that is marginal product will decline another consideration is the marginal revenue product of labor mrpl which is the change in revenue that results from employing an additional unit of labor holding all other inputs constant this can be used to determine the optimal number of workers to employ at a given market wage rate according to economic theory profit maximizing firms will hire workers up to the point where the marginal revenue product is equal to the wage rate because it is not efficient for a firm to pay its workers more than it will earn in revenues from their labor common reasons for a shift in labor demand | |
what is demand pull inflation | demand pull inflation occurs when demand for goods and services exceeds supply in the economy while demand increases the supply of goods and services available for purchase may remain the same or drop demand pull inflation causes upward pressure on prices due to shortages in supply a condition that economists describe as too many dollars chasing too few goods an increase in aggregate demand can also lead to this type of inflation demand pull inflation can be compared with cost push inflation investopedia xiaojie liu | |
how demand pull inflation works | the term demand pull inflation describes a widespread phenomenon that occurs when consumer demand outpaces the available supply of many types of consumer goods when demand pull inflation sets in it forces an overall increase in the cost of living demand pull inflation is a tenet of keynesian economics that describes the effects of an imbalance in aggregate supply and demand when the aggregate demand in an economy strongly outweighs the aggregate supply prices go up this is the most common cause of inflation in keynesian economics an increase in employment leads to an increase in aggregate demand for consumer goods in response to the demand companies hire more people so that they can increase their output the more people firms hire the more employment increases eventually the demand for consumer goods outpaces the ability of manufacturers to supply them inflation is a general rise in the price of goods in an economy causes of demand pull inflationthere are five primary causes of demand pull inflation demand pull inflation vs cost push inflationcost push inflation occurs when money is transferred from one economic sector to another specifically an increase in production costs such as raw materials and wages inevitably is passed on to consumers in the form of higher prices for finished goods demand pull and cost push inflation move in practically the same way but they work on different aspects of the system demand pull inflation demonstrates the causes of price increases cost push inflation shows how inflation once it begins is difficult to stop in good times companies hire more but eventually higher consumer demand may outpace production capacity causing inflation example of demand pull inflationhere s a hypothetical example to show how demand pull inflation works let s assume the economy is in a boom period and the unemployment rate falls to a new low interest rates are at a low point too the federal government seeking to get more gas guzzling cars off the road initiated a special tax credit for buyers of fuel efficient cars the big auto companies are thrilled although they didn t anticipate such a confluence of upbeat factors all at once demand for many models of cars goes through the roof but the manufacturers literally can t make them fast enough the prices of the most popular models rise and bargains are rare the result is an increase in the average price of a new car it s not just cars that are affected though with almost everyone gainfully employed and borrowing rates at a low consumer spending on many goods increases beyond the available supply that s demand pull inflation in action | |
what does demand pull mean in economics | demand pull is a form of inflation it refers to instances when demand for goods and services exceeds the available supply of those goods and services in the economy economists suggest that prices can be pulled higher by an increase in aggregate demand that outstrips the available supply of goods in an economy the result can be inflation | |
what are the 3 types of inflation | inflation is sometimes classified into three types demand pull inflation cost push inflation and built in inflation built in inflation is an alternative explanation for rising prices that differs from cost push and demand pull theories which highlights the role of expectations for future inflation by consumers and businesses | |
how does inflation impact the economy | inflation can affect the economy in several ways for example if inflation causes a nation s currency to decline this can benefit exporters by making their goods more affordable when priced in the currency of foreign nations on the other hand this could harm importers by making foreign made goods more expensive higher inflation can also encourage spending as consumers will aim to purchase goods quickly before their prices rise further savers on the other hand could see the real value of their savings erode limiting their ability to spend or invest in the future the bottom linedemand pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply as consumers demand more given limited supply prices are bid higher demand pull inflation can be contrasted with cost push inflation whereby higher costs of production are passed on to consumers | |
what is a demand schedule | in economics a demand schedule is a table that shows the quantity demanded of a good or service at different price levels a demand schedule can be graphed as a continuous demand curve on a chart where the y axis represents price and the x axis represents quantity investopedia madelyn goodnightunderstanding demand schedulesa demand schedule most commonly consists of two columns the first column lists the price for a product in ascending or descending order the second column lists the quantity of the product desired or demanded at that price the price is determined based on research on the market | |
when the data in the demand schedule is graphed to create the demand curve it supplies a visual demonstration of the relationship between price and demand allowing easy estimation of the demand for a product or service at any point along the curve | a demand schedule tabulates the quantity of goods that consumers will purchase at given prices demand schedules vs supply schedulesa demand schedule is typically used in conjunction with a supply schedule which shows the quantity of a good that would be supplied to the market by producers at given price levels by graphing both schedules on a chart with the axes described above it is possible to obtain a graphical representation of the supply and demand dynamics of a particular market in a typical supply and demand relationship as the price of a good or service rises the quantity demanded tends to fall if all other factors are equal the market reaches an equilibrium where the supply and demand schedules intersect at this point the corresponding price is the equilibrium market price and the corresponding quantity is the equilibrium quantity exchanged in the market | |
how to graph a demand schedule | it can be useful to graph a demand and supply schedules for a visual representation of the market for a particular product in a traditional supply and demand graph the vertical axis represents the price for a particular product and the horizontal axis represents the quantity of goods at that price using the tables for the demand schedule start by marking the quantity of goods demanded at each specific price point this curve should start in the upper left and end in the lower right when the price is high consumers demand a lower quantity of that good and vice versa this is the demand curve the reverse is true for graphing the supply curve suppliers provide a higher quantity for higher prices and a lower quantity for lower prices the point where the two curves meet is called the equilibrium point economist alfred marshall is usually credited with pioneering the supply and demand curves that are used in economics textbooks today however these graphical visualizations actually originated with french economist antoine augustin cournot in 1838 1additional factors on demandprice is not the sole factor that determines the demand for a particular product demand may also be affected by the amount of disposable income available shifts in the quality of the goods in question effective advertising and even weather patterns price changes of related goods or services may also affect demand if the price of one product rises demand for a substitute may rise while a fall in the price of a product may increase demand for its complements for example a rise in the price of one brand of coffeemaker may increase the demand for a relatively cheaper coffeemaker produced by a competitor if the price of all coffeemakers falls the demand for coffee a complement to the coffeemaker market may rise as consumers take advantage of the price decline in coffeemakers importance of a demand scheduledemand schedules play an important part in economics in projecting future economic activity and for management to predict how their product s will perform for this reason there are many different aspects of value to a demand schedule some demand schedule curves are not gradual consider a gift card for 100 if a company sells it for less than 100 demand will be substantially higher if a company sells it for more than 100 there theoretically be no financial demand for the gift card unless there are other factors to consider such as charitable donations limitations of a demand schedulethere are several downsides to a demand schedule though the law of demand is primarily focused on a good s price there are other factors that may cause changes in the demand for a product such as consumer preference product utility market innovation and global circumstances such a weather demand schedules also face the risk of obsolescence and being outdated if they are not periodically reviewed for example consider the latest iphone model and the potential demand schedule for the good upon the announcement of the next iphone model there may be immediate implications to the demand schedule of the prior version by extension the demand schedule is handcuffed to the demand curve and the demand curve does shift based on external factors last the demand schedule is simply a forecast there s no way of knowing the projections will actually materialize until a product is brought to market time passes and data can be analyzed companies would be best suited on comparing forecast demand schedules with actual demand schedules to ensure they are continually learning from prior estimates example of a demand scheduleconsider an example of a company trying to determine the best pricing strategy for its brand new 40 4k hdtv the company has performed market analysis including conducting surveys of potential consumers and has pulled together the following demand schedule from this curve the company realizes there is substantial demand for the product as the price decreases which is standard for the law of demand however the company is disappointed in how quickly the demand curve appears to have dropped off once the television is priced at greater than 1 000 it decides to do another market survey but this time is approaches two geographical markets several conclusions can be pulled from this second demand schedule first the demand curve is much less steep consumers in the second market don t dramatically have more demand for the tv as the price declines like the first market the other main takeaway is that demand is simply lower for this reason the company could leverage this information to 1 attempt to sell fewer tvs in the second market at a higher price point and 2 attempt to sell more tvs in the first market at a lower price point | |
what information does a demand schedule show | a demand schedule is meant to inform a manufacturer distributor or retailer of consumer demand for a product at different price points this information may or may not incorporate a time series where the demand schedule can be tracked over time alternatively a demand schedule from different markets may be compiled and shown against each other for comparative analysis | |
what are the 2 types of demand schedules | demand schedules may be prepared for individual consumers or for the broad general market these two demand schedules will differ as the market demand schedule will encompass a more broad set of expectations while an individual demand schedule may be more refined into a specific subset of data | |
what are demand schedules used for | demand schedules are used to make manufacturing plans forecast sales ensure appropriate resources are on hand to meet demand and to set pricing strategies the demand schedule summarizes the economic impact of how rising prices can influence the demand of a good and vice versa the bottom linea demand schedule is a series of points that identify what consumer demand will be for a product at different price points businesses use this information to make smarter business decisions as sometimes it is not always in the best interest to simply try and sell a product for the highest possible price this information from a demand schedule also informs management of selling manufacturing and delivery needs in the future | |
what is a demand shock | a demand shock is a sudden unexpected event that dramatically increases or decreases demand for a product or service usually temporarily a positive demand shock is a sudden increase in demand while a negative demand shock is a decrease in demand either shock will have an effect on the prices of the product or service a demand shock may be contrasted with a supply shock which is a sudden change in the supply of a product or service that causes an observable economic effect supply and demand shocks are examples of economic shocks understanding a demand shocka demand shock is a large but transitory disruption of the market price for a product or service caused by an unexpected event that changes the perception and demand an earthquake a terrorist event a technological advance and a government stimulus program can all cause a demand shock so can a negative review a product recall or a surprising news event | |
when the demand for a good or service rapidly increases its price typically increases because suppliers cannot cope with the increased demand in economic terms this results in a shift in the demand curve to the right a sudden drop in demand causes the opposite to happen the supply in place is too great for the demand | other demand shocks can come from the anticipation of a natural disaster or climate event such as a run on bottled water backup generators or electric fans a positive demand shock can come from fiscal policy such as an economic stimulus or tax cuts negative demand shocks can come from contractionary policy such as tightening the money supply or decreasing government spending whether positive or negative these may be considered deliberate shocks to the system examples of demand shocksthe rise of electric cars over the past few years is a real world example of a demand shock it was hard to predict the demand for electric cars and therefore for their component parts lithium batteries for example had low demand as recently as the mid 2000s from 2010 the rise in the demand for electric cars from companies like tesla motors increased the overall market share of these cars to 3 or roughly 2 100 000 vehicles the demand for lithium batteries to power the cars also increased sharply and somewhat unexpectedly lithium is a limited natural resource that is difficult to extract and found only in certain parts of the world production has been unable to keep up with the growth in demand and so the supply of newly mined lithium remains lower than it would be otherwise the result is a demand shock over the period from 2016 to 2018 demand for lithium more than doubled increasing the average price per metric ton from 8 650 in 2016 to 17 000 in 2018 1 over the past decade the increase in demand for electric cars from companies like tesla motors tsla has increased the overall market share of these cars to more than 4 of car sales in 2022 2 the demand for lithium batteries to power the cars also increased sharply and somewhat unexpectedly during this time demand exploded for electric vehicles and also battery powered mobile phones laptops and tablets from 2020 to 2022 the price of lithium has more than doubled again this is because the covid 19 pandemic initially caused a decrease in demand that caused the price of a metric ton of li to fall to 8 000 however as the economy recovered the price quickly spiked to 17 000 once again by the end of 2021 3 the cost has been passed onto the consumer raising the cost of electric cars in a positive demand shock environment the cathode ray tube is an example of a negative demand shock the introduction of low cost flat screen televisions caused the demand for cathode ray tube tvs and computer screens to drop to nearly zero in a few short years not incidentally the introduction of low cost flat screens caused a once common service job the television repairman to become virtually extinct | |
how does a demand shock differ from a supply shock | a demand shock occurs when there is an unexpected change in demand such that suppliers cannot quickly enough respond a supply shock on the other hand is when there is an unexpected change in supply often a sudden reduction although supply shocks also exist when there is a glut | |
what can cause a demand shock | demand shocks may be caused for one or more of several reasons an economic recession may lead to high unemployment where people are unable to spend as they had before natural or geopolitical disasters can also have a similar effect in the short run demand shocks can also occur if a technological advance makes a previous technology quickly obsolete did government stimulus checks create a demand shock in the wake of the covid 19 pandemic the u s government issued a series of stimulus checks to american households the goal was to help families cope with lockdowns business closures and other disruptions however these checks also may have been a positive demand shock boosting spending by too much as the economy recovered and leading to high inflation 4 | |
what is demand theory | demand theory is an economic principle relating to the relationship between the demand for consumer goods and services and their prices in the market demand theory forms the basis for the demand curve which relates consumer desire to the amount of goods available as more of a good or service is available demand drops and so does the equilibrium price demand theory highlights the role that demand plays in price formation while supply side theory favors the role of supply in the market understanding demand theorydemand is simply the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period people demand goods and services in an economy to satisfy their wants such as food healthcare clothing entertainment shelter etc the demand for a product at a certain price reflects the satisfaction that an individual expects from consuming the product this level of satisfaction is referred to as utility and it differs from consumer to consumer the demand for a good or service depends on two factors 1 its utility to satisfy a want or need and 2 the consumer s ability to pay for the good or service in effect real demand is when the readiness to satisfy a want is backed up by the individual s ability and willingness to pay demand theory is one of the core theories of microeconomics it aims to answer basic questions about how badly people want things and how demand is impacted by income levels and satisfaction utility based on the perceived utility of goods and services by consumers companies adjust the supply available and the prices charged built into demand are factors such as consumer preferences tastes choices etc evaluating demand in an economy is therefore one of the most important decision making variables that a business must analyze if it is to survive and grow in a competitive market the market system is governed by the laws of supply and demand which determine the prices of goods and services when supply equals demand prices are said to be in a state of equilibrium when demand is higher than supply prices increase to reflect scarcity conversely when demand is lower than supply prices fall due to the surplus the law of demand and the demand curvethe law of demand introduces an inverse relationship between price and demand for a good or service it simply states that as the price of a commodity increases demand decreases provided other factors remain constant also as the price decreases demand increases this relationship can be illustrated graphically using a tool known as the demand curve the demand curve has a negative slope as it charts downward from left to right to reflect the inverse relationship between the price of an item and the quantity demanded over a period of time an expansion or contraction of demand occurs as a result of the income effect or substitution effect when the price of a commodity falls an individual can get the same level of satisfaction for less expenditure provided it s a normal good in this case the consumer can purchase more of the goods on a given budget this is the income effect the substitution effect is observed when consumers switch from more costly goods to substitutes that have fallen in price as more people buy the good with the lower price demand increases sometimes consumers buy more or less of a good or service due to factors other than price this is referred to as a change in demand a change in demand refers to a shift in the demand curve to the right or left following a change in consumers preferences taste income etc for example a consumer who receives an income raise at work will have more disposable income to spend on goods in the markets regardless of whether prices fall leading to a shift to the right of the demand curve the law of demand is violated when dealing with giffen or inferior goods giffen goods are inferior goods that people consume more of as prices rise and vice versa since a giffen good does not have easily available substitutes the income effect dominates the substitution effect supply and demandthe law of supply and demand is an economic theory that explains how supply and demand are related to each other and how that relationship affects the price of goods and services it s a fundamental economic principle that when supply exceeds demand for a good or service prices fall when demand exceeds supply prices tend to rise there is an inverse relationship between the supply and prices of goods and services when demand is unchanged if there is an increase in supply for goods and services while demand remains the same prices tend to fall to a lower equilibrium price and a higher equilibrium quantity of goods and services if there is a decrease in supply of goods and services while demand remains the same prices tend to rise to a higher equilibrium price and a lower quantity of goods and services the same inverse relationship holds for the demand of goods and services however when demand increases and supply remains the same the higher demand leads to a higher equilibrium price and vice versa supply and demand rise and fall until an equilibrium price is reached for example suppose a luxury car company sets the price of its new car model at 200 000 while the initial demand may be high due to the company hyping and creating buzz for the car most consumers are not willing to spend 200 000 for an auto as a result the sales of the new model quickly fall creating an oversupply and driving down demand for the car in response the company reduces the price of the car to 150 000 to balance the supply and the demand for the car to ultimately reach an equilibrium price who proposed the theory of supply and demand the theory of supply and demand is attributed to adam smith who observed that the costs of products rise and fall according to customer needs the theory was later expressed more formally by david ricardo in the principles of political economy and taxation | |
what factors affect demand | the main factors that affect demand for a good are the price the perceived quality of that product the prices of competing products and the income levels of the buyer consumer preferences also play a role and effective branding or advertising strategies can help to increase demand for some products | |
how does demand affect prices | prices tend to increase during periods of high demand and fall when demand is low this is because consumers compete with one another to secure scarce goods effectively bidding the price higher note that this is even true if there is an official ceiling to price growth if the government attempts to cap prices it may create an informal black market with high prices the bottom linethe theory of demand usually associated with the economist adam smith represents one half of the theory of supply and demand that forms the organizing principle for market economies it states that prices rise for goods that are in demand and fall for goods that are not in demand these prices act as a market signal to producers telling them when to produce more or less of a given good | |
what is dematerialization demat | dematerialization demat is the move from physical certificates to electronic bookkeeping actual stock certificates are then removed and retired from circulation in exchange for electronic recording | |
how dematerialization works | with the age of computers and the depository trust company securities no longer need to be in certificate form they can be registered and transferred electronically the introduction of dematerialization allowed for accounts to be updated automatically and swiftly in earlier eras transactions at stock exchanges were conducted by traders who shouted buy and sell prices the deals were recorded on paper receipts after the markets closed the paperwork would continue in order to properly register all the transactions the benefits of dematerializationthrough dematerialization so called demat accounts allow for electronic transactions when shares of stock are bought and sold within a demat account the certificates for stocks and other securities of the user are held as a means for seamless trades to be made the introduction of dematerialization served to eliminate such a paper oriented process furthermore by adopting electronic bookkeeping this allowed for accounts to be updated automatically and swiftly dematerialization applies not only to stocks but also to other forms of investment such as bonds mutual funds and government securities the use of dematerialization and demat accounts is comparable to using a bank and bank accounts to maintain one s assets rather than personally storing and exchanging paper money each time a transaction is made using a debit card at a store creates a digital record of purchase and the amount is deducted from the cardholder s account funds are exchanged between buyers and sellers without paper currency likewise with dematerialization the stock transactions are completed without physical certificates brokers or other intermediaries will typically retain the electronic records of the transactions associated with the assets if the holder of a physical paper bond or other security wishes to dematerialize the document they usually surrender the certificate with an intermediary they should receive some sort of electronic notification that the record has been dematerialized and they may proceed with conducting transactions some assets for example publicly traded shares require a demat account to engage in trades and other transactions this is because markets now operate through electronic transactions rather recorded on paper the benefits of dematerialization can also include increased security and surety of transactions and the elimination of steps that could slow down the process of clearing transactions errors can be avoided that might otherwise be introduced in the handling of physical records there might also be some savings by eliminating paperwork that may have included processing fees | |
what is demographic dividend | demographic dividend refers to the growth in an economy that is the result of a change in the age structure of a country s population the change in age structure is typically brought on by a decline in fertility and mortality rates understanding demographic dividendwhile most countries have seen an improvement in child survival rates birth rates remain high in many of them particularly in lesser developed countries these countries therefore rarely enjoy an economic benefit known as the demographic dividend demographic dividends are occurrences in a country that enjoys accelerated economic growth that stems from the decline in fertility and mortality rates a country that experiences low birth rates in conjunction with low death rates receives an economic dividend or benefit from the increase in productivity of the working population that ensues as fewer births are registered the number of young dependents grows smaller relative to the working population with fewer people to support and more people in the labor force an economy s resources are freed up and invested in other areas to accelerate a country s economic development and the future prosperity of its populace to receive a demographic dividend a country must go through a demographic transition where it switches from a largely rural agrarian economy with high fertility and mortality rates to an urban industrial society characterized by low fertility and mortality rates in the initial stages of this transition fertility rates fall leading to a labor force that is temporarily growing faster than the population dependent on it all else being equal per capita income grows more rapidly during this time too this economic benefit is the first dividend received by a country that has gone through the demographic transition a decline in fertility and mortality rates boosts working population productivity which leads to a demographic dividend types of demographic dividendthe first dividend period generally lasts for a long time typically five decades or more eventually however the reduced birth rate reduces labor force growth meanwhile improvements in medicine and better health practices lead to an ever expanding elderly population sapping additional income and putting an end to the demographic dividend at this stage all else being equal per capita income grows at a decelerated rate and the first demographic dividend becomes negative an older working population facing an extended retirement period has a powerful incentive to accumulate assets to support themselves these assets are usually invested in both domestic and international investment vehicles adding to a country s national income the increase in national income is referred to as the second dividend which continues to be earned indefinitely the benefits gotten from a demographic transition is neither automatic nor guaranteed any demographic dividend depends on whether the government implements the right policies in areas such as education health governance and the economy in addition the amount of demographic dividend that a country receives depends on the level of productivity of young adults which in turn depends on the level of schooling employment practices in a country timing and frequency of childbearing as well as economic policies that make it easier for young parents to work the dividend amount is also tied to the productivity of older adults which depends on tax incentives health programs and pension and retirement policies there are four main areas where a country can find demographic dividends | |
what are demographics | demographics are statistics that describe populations and their characteristics demographic analysis is the study of a population based on factors such as age race and sex demographic data refers to socioeconomic information expressed statistically including employment education income marriage rates birth and death rates and more governments corporations and non government organizations use demographics to learn more about a population s characteristics for many purposes including policy development and economic market research for example a company that sells high end rvs may want to reach people nearing or at retirement age and the percentage of those who can afford their products investopedia paige mclaughlinunderstanding demographicsdemographic analysis is the collection and study of data regarding the general characteristics of specific populations it is frequently used as a business marketing tool to determine the best way to reach customers and assess their behavior segmenting a population by using demographics allows companies to determine the size of a potential market the use of demographics helps determine whether its products and services are being targeted to that company s most influential consumers for example market segments may identify a particular age group such as baby boomers born 1946 1964 or millennials born 1981 1996 with specific buying patterns and characteristics 1the advent of the internet social media predictive algorithms and big data has dramatic implications for collecting and using demographic information modern consumers give out a flood of data sometimes unwittingly collected and tracked through their online and offline lives by myriad apps social media platforms third party data collectors retailers and financial transaction processors combined with the growing field of artificial intelligence this mountain of collected data can be used to predict and target consumer choices and buying preferences with uncanny accuracy based on their demographic characteristics and past behavior types of demographic informationfor corporate marketing goals demographic data is collected to build a customer base profile the common variables gathered in demographic research include age sex income level race employment location homeownership and level of education demographical information makes certain generalizations about groups to identify customers additional demographic factors include gathering data on preferences hobbies lifestyle and more governmental agencies collect data when conducting a national census and may use that demographic data to forecast economic patterns and population growth to better manage resources you can gather demographic information on a large group and then break it down into smaller subsets for deeper dive into your research special considerationsmost large companies conduct demographic research to determine how to market their product or service and best market to the target audience it is valuable to know the current customer and where the potential customer may come from in the future demographic trends are also significant since the size of different demographic groups changes over time due to economic cultural and political circumstances this information helps the company decide how much capital to allocate to production and advertising for example the aging u s population has specific needs that companies want to anticipate each market segment can be analyzed for its consumer spending patterns older demographic groups spend more on healthcare products and pharmaceuticals and communicating with these customers differs from that of their younger counterparts | |
why do demographics matter | demographics refers to the description or distribution of characteristics of some target audience customer base or population governments use socioeconomic information to understand the age racial makeup and income distribution among several other variables in neighborhoods cities states and nations in order to make better public policy decisions companies look to demographics to craft more effective marketing and advertising campaigns and to understand patterns among different audiences who collects demographic data the u s census bureau collects demographic data on the american population every year through the american community survey acs and every 10 years via an in depth count of every american household 2 companies use marketing departments or outsource to specialized marketing firms to collect demographics on users customers or prospective client groups academic researchers also collect demographic data for research purposes using various survey instruments political parties and campaigns also collect demographics in order to target messaging for political candidates | |
why do businesses need demographics | demographics are key to businesses today they help identify the individual members of an audience by selecting key characteristics wants and needs this allows companies to tailor their efforts based on particular segments of their customer base online advertising and marketing have made enormous headway over the past decade in using algorithms and big data analysis to micro target ads on social media to very specific demographics | |
how are demographic changes important for economists | economists recognize that one of the major drivers of economic growth is population growth or decline there is a straightforward relationship when identifying this growth rate of gross domestic product gdp growth rate of population growth rate of gdp per capita where gdp per capita is simply gdp divided by population the more people around the more available workers there are in the labor force and also more people to consume items like food energy cars and clothes there are also demographic problems that lie on the horizon such as an increasing number of retirees who while no longer in the workforce are nonetheless expected to live longer lives unfortunately the number of new births seems to be too low to replace those retirees in the workforce the bottom linedemographics and demographic analysis is used to describe the distribution of characteristics in a society or other population in order to understand them make policy recommendations and make predictions about where a society or group is headed in the future demographic data can come in many forms but most often describes the distribution of characteristics found in populations such as age sex gender marital status household structure income wealth education religion and so on and to see how these are changing over time birth and death rates are also used to understand if a population is growing or not and how this might affect things like economic growth employment government programs like social security and so on | |
what is demonetization | demonetization is the act of stripping a currency unit of its status as legal tender it occurs whenever there is a change in national currency the current form or forms of money is pulled from circulation and retired often to be replaced with new notes or coins sometimes a country completely replaces the old currency with a new currency understanding demonetizationremoving the legal tender status of a unit of currency is a drastic intervention into an economy because it directly affects the medium of exchange used in all economic transactions it can help stabilize existing problems or it can cause chaos in an economy especially if undertaken suddenly or without warning that said demonetization is undertaken by nations for a number of reasons demonetization has been used to stabilize the value of a currency or combat inflation the coinage act of 1873 demonetized silver as the legal tender of the united states in favor of fully adopting the gold standard in order to stave off disruptive inflation as large new silver deposits were discovered in the american west several coins including a two cent piece three cent piece and half dime were discontinued the withdrawal of silver from the economy resulted in a contraction of the money supply which contributed to a recession throughout the country 2 in response to the recession and political pressure from farmers and from silver miners and refiners the bland allison act remonetized silver as legal tender in 1878 3in a more modern example the zimbabwean government demonetized its dollar in 2015 as a way to combat the country s hyperinflation at its peak zimbabwe s hyperinflation reached month over month growth of 79 6 million percent growth and year over year growth of 89 7 sextillion percent 4 the three month process involved expunging the zimbabwean dollar from the country s financial system and solidifying the u s dollar the botswana pula and the south african rand as the country s legal tender in a bid to stabilize the economy 5some countries have demonetized currencies in order to facilitate trade or form currency unions an example of demonetization for trade purposes occurred when the nations of the european union officially began to use the euro as their everyday currencies in 2002 when the physical euro bills and coins were introduced the old national currencies such as the german mark the french franc and the italian lira were demonetized however these varied currencies remained convertible into euros at fixed exchange rates for a while to assure a smooth transition 6the opposite of demonetization is remonetization in which a form of payment is restored as legal tender pros and cons of demonetizationthere are several advantages when a nation demonetizes its currency fraudulent financial practices may be minimized as individuals will be unable to exchange illegal tender with banks this also includes the potential reduction in tax evasion pumping additional revenue into a nation s economy demonetizing physical paper tender also demonstrates an advancing banking system as digital currency can be more accessible safer to store and easier to transfer ownership organized industries and companies often benefit the greatest due to an easier transition demonetization isn t without its faults it s inconvenient for the nation s citizens and may be confusing when only select denominations are phased out over time as a result of the disturbance a nation s economy may temporarily experience a period of stalled growth in the short term as the demonetization process occurs there are costly logistical measures to be taken as well atms and other means of disbursing cash must be modified and recoded consumer prices must be reframed to ensure proper change can be given if needed daily wage earners often among the poorest with no to minimal savings may continue to be paid in defunct tender and must miss work to exchange their earnings with a bank often results in decreased tax evasion and increased tax revenueofte nresults in higher long term gdp due to higher tax revenue being reinvested in the nationfosters innovation by converting currency to digital currency and promoting digital transactionsreduces overall crime by enhancing transparency and discouraging the circulation of black money imposes a burden on citizens especially those who must convert one currency to anotherlikely stalls a nation s gdp during the conversion processincurs expensive administrative costs including printing adjusting atms and marketing the changes negatively impacts and even stops cash driven sectorsintroduces new types of currency risk such as cybercrimedemonetization example in indialastly demonetization has been tried as a tool to modernize a cash dependent developing economy and to combat corruption and crime counterfeiting tax evasion in 2016 the indian government decided to demonetize the 500 and 1000 rupee notes the two biggest denominations in its currency system these notes accounted for 86 of the country s circulating cash with little warning india s prime minister narendra modi announced to the citizenry on nov 8 2016 that those notes were worthless effective immediately and they had until the end of the year to deposit or exchange them for newly introduced 2000 rupee and 500 rupee bills 78chaos ensued in the cash dependent economy some 78 of all indian customer transactions are in cash as long snaking lines formed outside atms and banks which had to shut down for a day the new rupee notes have different specifications including size and thickness requiring re calibration of atms only 60 of the country s 200 000 atms were operational even those dispensing bills of lower denominations faced shortages the government s restriction on daily withdrawal amounts added to the misery though a waiver on transaction fees did help a bit severe cash shortages were recurring even through 2018 9small businesses and households struggled to find cash and reports of daily wage workers not receiving their dues surfaced the rupee fell sharply against the dollar the government s goal and rationale for the abrupt announcement was to combat india s thriving underground economy on several fronts eradicate counterfeit currency fight tax evasion only 1 of the population pays taxes eliminate black money gained from money laundering and terrorist financing activities and to promote a cashless economy 1individuals and entities with huge sums of black money gotten from parallel cash systems were forced to take their large denomination notes to a bank which was by law required to acquire tax information on them if the owner could not provide proof of making any tax payments on the cash a penalty of 200 of the owed amount was imposed 10other uses of demonetizationdemonetization can also refer to the business practice of denying payment and is often experienced related to social media demonetization happens when a platform s content creator used to receive payment but due to underlying changes in the platform are no longer eligible this may occur due to a terms and conditions violation or due to changes in the platform s algorithms that determine which creators are eligible to earn revenue although used in an entirely different context this form of demonetization is similar to the form of discontinuing legal tender for both an asset once held value but due to underlying changes in the nature of the asset it no longer holds any monetary value | |
why would a country demonetize | demonetization has been used to stabilize the value of a currency or combat inflation some countries have demonetized currencies in order to facilitate trade or form currency unions lastly demonetization has been tried as a tool to modernize a cash dependent developing economy and to combat corruption and crime counterfeiting tax evasion | |
what are the advantages of demonetization | the main benefit of demonetization is to curtail criminal activity as their supply of money is no longer legal tender this affects counterfeiters as well as they cannot exchange their merchandise for fear of discovery it can prevent tax evasion as those who were evading taxes must come forward to exchange their existing currency at which time the authorities can retroactively tax them finally it can usher in the digital currency age by slowing down the circulation of physical currency | |
what are the disadvantages of demonetization | the chief disadvantage is the costs involved in printing and minting the new currency also demonetization may not have the intended effect of reducing criminal activity as these entities might be savvy enough to hold assets in other forms other than physical currency finally this process is risky as it can plunge the nation into utter chaos if not handled with the utmost of competence | |
how does demonetization impact gdp | in the short term demonetization usually stunts economic growth and causes gdp to decline during the conversion process many industries and sectors may temporarily come to a halt some industries may not be able to pay laborers as the demonetization process occurs once demonetization is finished it often creates long term economic benefits that increase gdp in the long run demonetization attempts to fight financial crime by making transactions more transparent or discouraging the trade of illegal bills a government is usually able to collect more tax revenue and invest heavier into their country | |
what is demutualization | demutualization is a process by which a private member owned company such as a co op or a mutual life insurance company legally changes its structure in order to become a public traded company owned by shareholders understanding demutualizationdemutualization involves the complex process of transitioning a company s financial structure from a mutual company into a shareholder driven model mutual companies not to be confused with mutual funds are entities seeded by private investors who are also customers or members of these operations businesses such as insurance companies savings and loan associations banking trusts and credit unions are commonly structured as mutual companies mutual insurance companies typically collect policyholder premiums from their members and spread risk and profits through various mechanisms in america this practice dates back to 1716 when the nation s first ever insurance company was created by the synod of philadelphia which structured the operation as a mutual company in 2000 and 2001 a flurry of noteworthy demutualization events occurred in the insurance space with the demutualization of prudential insurance company sun life assurance company phoenix home life mutual insurance company principal life insurance company and the metropolitan life insurance company metlife the demutualization processin a demutualization a mutual company elects to change its corporate structure to a public company where prior members may receive a structured compensation or ownership conversion rights in the transition in the form of shares in the company several demutualization methodologies exist in a full demutualization a company launches an initial public offering ipo where it auctions stock to shareholders who may trade their equity positions over a public market exchange under this scenario the former members of the mutual company do not automatically receive stock and must consequently invest separately alternatively with the sponsored demutualization method after the ipo former members of the mutual company automatically receive shares in the newly formed company under this model members typically receive greater compensation for their previous membership and generally don t have to invest personal capital in the newly issued shares however they may buy additional shares if they choose | |
what is a denomination | a denomination refers to the units classification for the stated or face value of financial instruments such as currency notes or coins as well as for securities bonds and other investments the denomination can therefore be used to quote the base currency in a forex transaction or the quoted currency in a financial asset this use of the term helps define the acceptable payment in trades and the monetary unit in which it is priced for example when indicating u s dollar denominated bonds issued by a foreign government understanding denominationmost often a denomination is a unit of value or numeraire given to money or currencies like coins and notes as well as other financial instruments that maintain set values such as government issued bonds the denomination value of such a fixed income security is often referred to as its face value because it appears on the front or face of the financial instrument in the united states currency notes dispensed by most automated teller machines atms are only available in certain denominations as an example some atms offer 20 bills and 100 bills while others might provide 10 and 50 notes in a trade transaction an exporter based in europe may invoice the buyer in u s dollars making the transaction u s dollar denominated while most commodities were quoted in terms of the dollar beginning in 2011 commodities such as crude oil could receive quotes in other currency denominations such as the euro some foreign entities will issue securities denominated in a different currency from their own for instance the government of argentina has issued u s dollar denominated sovereign debt and certain non u s corporations issue shares denominated in dollars par values as denominationsthe denomination affixed to a bond or other fixed income investment is equal to the bond s par value which is the amount paid upon maturity one may purchase bonds in a variety of denominations ranging from 50 to 10 000 when one buys a mutual bond it is sold for an amount below the marked denomination because the difference between the sales price and the value at maturity serves a function similar to the interest earned in other investment vehicles other types of securities are also issued with par values however the actual par value on a share of stock for instance is not an accurate assessment of the security s importance in the marketplace the par value here instead represents a minimum value for the holding when issuing common stock corporations actually issue them with a face value as little as zero or one cent this pricing convention allows them to avoid legal liabilities they may expose themselves to if they listed the stock at a higher price denominations and nomenclaturenomenclature is the act of applying a name to an item and many currencies carry not only the official denomination but also a nickname as an example the canadian dollar cad carries the nickname of the loonie because it has the image of a loon bird on one side the american 100 bill is known as a benjamin because it carries the picture of benjamin franklin real world examplesome individual pieces of currency have a higher retail market value than their officially marked denomination these currencies are collectible and sought after by hobbyists and those looking for an alternative investment for example some u s quarters produced between 1932 and 1964 comprised 90 silver content consequently although the face value maintains their worth at 25 cents the market value may be higher based on the price of silver the melt value of silver the condition of a specific coin and the date and mint involved this difference between the denomination and the melt value ultimately led to a change in the materials used to produce quarters | |
what is the dependency ratio | the dependency ratio is a measure of the number of dependents aged zero to 14 and over the age of 65 compared with the total population aged 15 to 64 this demographic indicator gives insight into the number of people of non working age compared with the number of those of working age it is also used to understand the relative economic burden of the workforce and has ramifications for taxation the dependency ratio is also referred to as the total or youth dependency ratio 1investopedia jake shiformula for the dependency ratio dependency ratio dependents population aged 15 to 64 1 0 0 text dependency ratio frac text dependents text population aged 15 to 64 cdot 100 dependency ratio population aged 15 to 64 dependents 100 | |
what does the dependency ratio tell you | a high dependency ratio means those of working age and the overall economy face a greater burden in supporting the aging population the youth dependency ratio includes those only under 15 and the elderly dependency ratio focuses on those over 64 the dependency ratio focuses on separating those of working age deemed between the ages of 15 and 64 years of age from those of non working age this also provides an accounting of those who have the potential to earn their own income and who are most likely to not earn their own income 1various employment regulations make it unlikely that individuals less than 15 years old would get employed for any personal income 23 a person who turns 65 years old is generally considered to be of normal retirement age and is not necessarily expected to be part of the workforce 4 it is the lack of income potential that generally qualifies those under 15 and over 64 as dependents as it is often necessary for them to receive outside support to meet their needs an analysis of dependency ratiosdependency ratios are generally reviewed to compare the percentage of the total population classified as working age that will support the rest of the non working age population this provides an overview for economists to track shifts in the population as the percentage of non working citizens rises those who are working are likely subject to increased taxes to compensate for the larger dependent population at times the dependency ratio is adjusted to reflect a more accurate dependency this is due to the fact those over 64 often require more government assistance than dependents under the age of 15 as the overall age of the population rises the ratio can be shifted to reflect the increased needs associated with an aging population 1example of the dependency ratiofor example assume that the mythical country of investopedialand has a population of 1 000 people and there are 250 children under the age of 15 500 people between the ages of 15 and 64 and 250 people aged 65 and older the youth dependency ratio is 50 or 250 500 limitations of the dependency ratiothe dependency ratio only considers age when determining whether a person is economically active other factors may determine if a person is economically active aside from age including status as a student illness or disability stay at home parents early retirement and the long term unemployed additionally some people choose to continue working beyond age 64 | |
what is a good dependency ratio | a good dependency ratio is a low dependency ratio a low dependency ratio indicates that there is a sufficient number of people in the workforce that can support the dependent population lower dependency ratios typically signify better healthcare for aging adults as well as higher pensions a high dependency ratio on the other hand indicates stress on the economy as the dependent population is too large to be supported by the workforce | |
which country has the lowest dependency ratio | as of 2022 the country with the lowest dependency ratio is united arab emirates with a ratio of 20 57 the country with the highest dependency ratio at 105 13 is niger the united states has a dependency ratio of 54 05 5 | |
what affects the dependency ratio | age is the primary factor that affects the dependency ratio as that determines who is and is not included in the workforce 1 the demographics of a nation however are affected by a variety of factors such as birth rates immigration policies and other government policies such as china s previous one child policy if a country can attract foreign workers it will help grow the workforce similarly if the birth rate is high then there will be enough individuals to replace the portion of the workforce that retires these factors would help lower the dependency ratio the bottom linethe dependency ratio is a demographic indicator that measures the number of dependents aged zero to 14 and over the age of 65 compared with the total population aged 15 to 64 it is analyzed to determine the people of working age versus those of non working age which aids in understanding taxation which in turn impacts the government s revenue and therefore various aspects of the nation a lower dependency ratio is ideal as it signifies less of a burden on the workforce in supporting those who are not working | |
what are dependent care benefits | dependent care benefits are provided by an employer to an employee for use in caring for dependents such as young children or disabled family members dependent care benefits may include flexible spending accounts fsas paid leave and certain tax credits and can be worth thousands of dollars to eligible participants | |
how dependent care benefits work | dependents according to the internal revenue service irs are treated as an exemption credit that may be claimed on an annual tax return on its own the dependent credit can reduce a filer s taxable income by thousands of dollars children are the most commonly claimed dependent though dependent care benefits may be extended to cover a variety of people provided they meet several stipulations for example dependents may also be relatives roommates or even romantic partners the irs provides a guide on who may be claimed as a dependent dependent care benefits are available to individuals whose children are cared for by a daycare facility or provider such benefits may take the form of childcare tax credits or a dependent care flexible spending account fsa each provides tax savings based on money spent on childcare dependent care benefits are part of an overall employee benefits system administered by the irs 1dependent care benefits flexible spending accounta dependent care flexible spending account is available for individuals who care for a child or adult who is incapable of self care who lives in the taxpayer s home for at least eight hours each day and who can be claimed as a dependent on an income tax return these accounts allow individuals to pay for qualified child and dependent care expenses while lowering their taxable income this type of fsa is set up by an employer participants authorize their employer to withhold a specified amount from their paycheck each pay period and deposit the money in an account instead of using the fsa money to pay for expenses directly those costs are paid out of pocket and reimbursement must be applied for 2dependent care benefits child and dependent care creditthe child and dependent care credit is a tax credit available to taxpayers who paid for the care of their child spouse or dependent so they can work or look for work the irs maintains a comprehensive information page related to the child and dependent care credit which includes eligibility and timing requirements how much can be claimed and information on which forms to complete this tax credit not a deduction reduces the tax burden dollar for dollar 1the american rescue plan signed by president biden on march 11 2021 includes generous tax breaks to low and moderate income people originally capped at 35 of eligible expenses up to 2 100 the child and dependent care credit is now capped at 50 of eligible expenses up to 4 000 for one qualifying individual and 8 000 for two or more for 2021 in addition the credit is entirely refundable for 2021 3dependent care benefits paid leavemore and more employers are making paid family leave available to their workers nine states california colorado connecticut massachusetts new jersey new york oregon rhode island and washington and the district of columbia offer paid family and medical leave pfml hawaii provides paid medical leave in the form of temporary disability insurance 4 most workers are eligible for the family and medical leave act fmla which offers up to 12 weeks of unpaid leave per year to care for family members | |
what is a dependent | a dependent is a person who relies on someone else for financial support dependents can include children or other relatives having a dependent entitles a taxpayer to claim a dependency exemption on their tax return as long as the dependent meets the qualifying definition according to the internal revenue service irs a taxpayer who can demonstrate that they have a dependent also may be able to use this filing status to qualify for certain tax credits tests in the internal revenue code irc establish a person s eligibility to be a taxpayer s dependent for the purpose of dependency claims | |
how does dependency work | a dependent may be a qualifying child or another qualifying relative dependency status is determined by irc tests to qualify for dependent status three tests must be met for all dependents the dependent taxpayer test the joint return test and the citizen or resident test any person who may be claimed as a dependent by another taxpayer may not claim anyone as a dependent on their own tax return any person who filed a joint return as a married person cannot be claimed by anyone as a dependent on their tax return unless that dependent is filing a joint return only to claim a refund of tax that was withheld or paid as estimated taxes finally to be claimed as a dependent a person must be a u s citizen u s resident immigrant u s national or a resident of canada or mexico 1if you are married and filing jointly you and your spouse can both claim dependents and share any tax benefits in the case of separate returns whether you are married or not only one taxpayer may claim a given dependent on their income tax return which is particularly crucial in cases of dual custodial parents dependency claims of separated or divorced parents are resolved in favor of the custodial parent in some cases previously determined court decrees or a written declaration by the custodial parent may release the claim to the noncustodial parent 2types of dependentsspecific tests are used to determine if a dependent is a qualifying child or a qualifying relative to meet the irc relationship test and be considered a qualifying child the child must be to meet the irc age test the child must be the resident and support tests are the final tests to determine if the individual qualifies as a qualifying child to meet the resident test the child must have lived with the taxpayer for more than half of the year however there are exceptions to this rule for example if the child or the taxpayer is temporarily absent due to illness education business vacation military service institutionalized care for a child who is permanently and totally disabled or incarceration then the child is still considered part of the residence living with the taxpayer during this time 4the support test requires that the child cannot have provided more than half of their own financial support during the tax year 5you may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped this treatment applies for all years until the year when there is a determination that the child is no longer alive or the year when the child would have reached age 18 whichever is earlier 6if these tests are not met the taxpayer may decide to see if the tests for a qualifying relative are met these tests are slightly different and are applied only when the tests for a qualifying child are not met unlike a qualifying child a qualifying relative can be any age 7a qualifying relative must meet the not a qualifying child test the member of household or relationship test the gross income test and the support test in addition a child cannot be a taxpayer s qualifying relative if the child is the taxpayer s qualifying child or is the qualifying child of any other taxpayer 8to meet the member of household or relationship test the person either must live as a member of the taxpayer s household all year or be related to the taxpayer it is important to note that an adopted child is treated the same as a natural child and that any relationships established by marriage are not ended by death or divorce 9to meet the gross income test the dependent s gross income for the tax year must be less than the threshold amount 10 this amount changes every year for the 2023 tax year the tax return filed in 2024 it is 4 700 it increases to 5 050 for 2024 1112the deduction for personal and dependency exemptions is suspended until 2025 although the exemption amount is zero the ability to claim a dependent may make you eligible for other tax benefits 13finally to meet the support test the taxpayer must have provided more than 50 of the person s total support for the tax year this support test should be differentiated from the one for a qualifying child which tests whether the child provided more than half of their own support for the year 10dependent tax considerationsboth being a dependent and having a dependent can impact your tax return tax credits and deductions if the irc tests determine that you are a dependent then you may be eligible for certain tax credits and deductions on your own tax return investopedia s tax savings guide can help you maximize your tax credits deductions and savings order yours today the earned income tax credit eitc is a refundable tax credit for low to moderate income working individuals and couples particularly those with children the amount of eitc benefit a taxpayer receives depends on income and the number of children in their household 14the eitc is for 2023 and 2024 taxpayers can claim a child tax credit ctc of up to 2 000 for each child under age 18 if a taxpayer s income is not more than 200 000 or 400 000 if married filing jointly 17 if the credit exceeds the total taxes owed taxpayers will receive up to 1 600 2023 or 1 700 2024 of the balance as a refund through the additional child tax credit 1819you may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you and your spouse if filing a joint return to work or actively look for work the amount you receive is a percentage of the work related expenses you paid to a provider for the care of a qualifying individual and the percentage depends on your adjusted gross income agi 20the credit is capped at 35 of eligible expenses for those that make less than 15 000 per year up to 3 000 for one qualifying individual and 6 000 for two or more qualifying individuals 21the two education credits are the american opportunity tax credit aotc and the lifetime learning credit llc if the taxpayer has a dependent who attends a higher education institution then the taxpayer will be eligible to claim the education credits associated with the dependent the aotc is a credit for qualified education expenses paid for an eligible student for the first four years of higher education 22 the llc is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution 23 | |
what is a dependent person | a dependent is an individual that relies on another person for support most often financial support a dependent can be a child a relative or any other individual who cannot take care of themselves and relies on another person | |
what is a dependent for tax purposes | a dependent for tax purposes is a qualifying child or relative of the taxpayer as laid out by the irs this includes a child parent sibling or stepchild but not a spouse there are tax benefits a taxpayer can claim for having a dependent | |
how much is the tax credit for each dependent | in 2023 the child tax credit for each dependent is 2 000 with a maximum refundable amount of 1 600 rising to 1 700 in 2024 1919the bottom linea dependent is someone who relies on another individual for support usually a child or other relative who is unable to take care of themselves for tax purposes dependents must meet certain qualifying tests the dependent taxpayer test the joint return test and the citizen or resident test having qualifying dependents can make you eligible for certain tax benefits including child tax credit the child and dependent care tax credit and certain educational credits how many dependents you have can also affect the earned income tax credit you are eligible for | |
what is depletion | depletion is an accrual accounting technique used to allocate the cost of extracting natural resources such as timber minerals and oil from the earth like depreciation and amortization depletion is a non cash expense that lowers the cost value of an asset incrementally through scheduled charges to income where depletion differs is that it refers to the gradual exhaustion of natural resource reserves as opposed to the wearing out of depreciable assets or aging life of intangibles | |
how depletion works | depletion for accounting and financial reporting purposes is meant to assist in accurately identifying the value of the assets on the balance sheet and recording expenses in the appropriate time period on the income statement | |
when the costs associated with natural resource extraction have been capitalized the expenses are systematically allocated across different time periods based upon the resources extracted the costs are held on the balance sheet until expense recognition occurs | recording depletionto calculate what expenses need to be spread out for the use of natural resources each different phase of production must be taken into consideration the depletion base is the capitalized costs depleted across multiple accounting periods there are four main factors that affect the depletion base percentage depletion methodone method of calculating depletion expense is the percentage depletion method it assigns a fixed percentage to gross revenue sales minus costs to allocate expenses for example if 10 million of oil is extracted and the fixed percentage is 15 1 5 million of capitalized costs to extract the natural resource are depleted the percentage depletion method requires a lot of estimates and is therefore not a heavily relied upon or accepted method of depletion cost depletion methodthe second method of calculating depletion is the cost depletion method cost depletion is calculated by taking the property s basis total recoverable reserves and number of units sold into account the property s basis is distributed among the total number of recoverable units as natural resources are extracted they are counted and taken out from the property s basis for example the capitalized costs of 1 million yields 500 000 barrels of oil in the first year if 100 000 barrels of oil are extracted the depletion expense for the period is 200 000 100 000 barrels 1 000 000 500 000 barrels reporting requirementsthe internal revenue service irs requires the cost method to be used with timber 1 it requires the method that yields the highest deduction to be used with mineral property which it defines as oil and gas wells mines and other natural deposits including geothermal deposits 2 because the percentage depletion looks at the property s gross income and taxable income limit as opposed to the amount of the natural resource extracted it is not an acceptable reporting method for certain natural resources | |
how a deposit works | a deposit is essentially your money that you transfer to another party such as when you move funds into a checking account at a bank or credit union in the case of depositing money into a bank account you can withdraw the money at any time transfer it to another person s account or use it to make purchases banks might also offer the creation of separate business accounts business banking also called corporate or commercial banking is designed to meet the needs of businesses they allow for deposits and withdrawals as with personal accounts but often have different limits some business accounts will allow employees to deposit or withdraw funds banks that offer business accounts frequently have night depositories which are secured lock boxes that allow users to deposit cash and checks when the bank is closed often you must deposit a certain amount of money called the minimum deposit to open a new bank account depositing money into a checking account qualifies as a transaction deposit which means that the funds are immediately available and liquid and you can withdraw them without delays 1the other definition of deposit is when a portion of funds is used as a security or collateral for the delivery of a good some contracts require a percentage of funds paid before the delivery as an act of good faith for example brokerage firms often require traders to make an initial margin deposit to enter into a new futures contract 2 | |
when you deposit money into some bank accounts it can earn interest this means that at fixed intervals a small percentage of the account s total is added to the amount of money already in the account interest can compound at different rates and frequencies depending on the terms of the bank | types of depositsthere are two main types of deposits demand and time example of a depositdeposits are often required on many large purchases such as real estate or vehicles for which sellers require payment plans financing companies typically set these deposits at a certain percentage of the full purchase price a down payment on a home is essentially a deposit you may have to pay a deposit in many rental scenarios whether you are renting an apartment car or another product the deposit is called the security deposit a security deposit s function is to cover any costs associated with any potential damage done to the property or asset rented during the rental period a partial or total refund is applied after the property or the asset is verified at the end of the rental period 5faqs | |
does every deposit made to a bank earn interest | not all deposits to a bank account earn interest interest is determined by the terms of the account many checking accounts do not provide interest while most savings accounts and certificates of deposit cds do can i make a deposit using a check from another bank you can make a deposit with a check from one bank to another most banks will take deposits in the form of cash checks money orders or cashier s checks if you re using a check to open an account there may be a holding period as the new bank ensures the check will clear | |
when i place a deposit for goods or services do i get the money back | this depends on your agreement in many rental agreements a security deposit is held to ensure that there is no damage to a property this may also be the case in renting equipment the deposit may be returned if the item or space is returned in the same condition for other items a deposit may be used a partial payment on the balance due the bottom linea deposit in finance is typically when you transfer money to a bank account like a checking account for safekeeping however it can have other meanings as well for example you may need to place a deposit or a certain amount of money with a business to secure goods or services such as for a rental | |
how a deposit works | a deposit is essentially your money that you transfer to another party such as when you move funds into a checking account at a bank or credit union in the case of depositing money into a bank account you can withdraw the money at any time transfer it to another person s account or use it to make purchases banks might also offer the creation of separate business accounts business banking also called corporate or commercial banking is designed to meet the needs of businesses they allow for deposits and withdrawals as with personal accounts but often have different limits some business accounts will allow employees to deposit or withdraw funds banks that offer business accounts frequently have night depositories which are secured lock boxes that allow users to deposit cash and checks when the bank is closed often you must deposit a certain amount of money called the minimum deposit to open a new bank account depositing money into a checking account qualifies as a transaction deposit which means that the funds are immediately available and liquid and you can withdraw them without delays 1the other definition of deposit is when a portion of funds is used as a security or collateral for the delivery of a good some contracts require a percentage of funds paid before the delivery as an act of good faith for example brokerage firms often require traders to make an initial margin deposit to enter into a new futures contract 2 | |
when you deposit money into some bank accounts it can earn interest this means that at fixed intervals a small percentage of the account s total is added to the amount of money already in the account interest can compound at different rates and frequencies depending on the terms of the bank | types of depositsthere are two main types of deposits demand and time example of a depositdeposits are often required on many large purchases such as real estate or vehicles for which sellers require payment plans financing companies typically set these deposits at a certain percentage of the full purchase price a down payment on a home is essentially a deposit you may have to pay a deposit in many rental scenarios whether you are renting an apartment car or another product the deposit is called the security deposit a security deposit s function is to cover any costs associated with any potential damage done to the property or asset rented during the rental period a partial or total refund is applied after the property or the asset is verified at the end of the rental period 5faqs | |
does every deposit made to a bank earn interest | not all deposits to a bank account earn interest interest is determined by the terms of the account many checking accounts do not provide interest while most savings accounts and certificates of deposit cds do can i make a deposit using a check from another bank you can make a deposit with a check from one bank to another most banks will take deposits in the form of cash checks money orders or cashier s checks if you re using a check to open an account there may be a holding period as the new bank ensures the check will clear | |
when i place a deposit for goods or services do i get the money back | this depends on your agreement in many rental agreements a security deposit is held to ensure that there is no damage to a property this may also be the case in renting equipment the deposit may be returned if the item or space is returned in the same condition for other items a deposit may be used a partial payment on the balance due the bottom linea deposit in finance is typically when you transfer money to a bank account like a checking account for safekeeping however it can have other meanings as well for example you may need to place a deposit or a certain amount of money with a business to secure goods or services such as for a rental | |
what is the deposit multiplier | the deposit multiplier is the maximum amount of money that a bank can create for each unit of money it holds in reserves the deposit multiplier involves the percentage of the amount on deposit at the bank that can be loaned that percentage normally is determined by the reserve requirement set by the federal reserve the deposit multiplier is key to maintaining an economy s basic money supply it s a component of the fractional reserve banking system which is now common to banks in most nations around the world understanding the deposit multiplierthe deposit multiplier is also called the deposit expansion multiplier or the simple deposit multiplier it s connected to the portion of a bank s deposits that can be lent to borrowers this lending activity injects money into the nation s money supply and supports economic activity essentially the deposit multiplier is an indicator of how banks can increase or multiply deposits central banks such as the federal reserve in the united states establish minimum amounts that banks must hold in reserve these amounts are known as required reserves banks must maintain reserves apart from what they loan to ensure that they have sufficient cash to meet any withdrawal requests from depositors 1 the fed pays banks a small amount of interest on their reserves which can be held at the bank or at a local federal reserve bank the deposit multiplier relates to the percentage of funds in reserve it provides an idea of how much money banks could create based on what they have to lend after accounting for reserves the deposit multiplier is the inverse of the percentage of required reserves so if the reserve requirement is 20 the deposit multiplier is 5 here s how that s calculated deposit multiplier 1 20deposit multiplier 5for every 1 a bank has in reserves it is able to increase deposits and theoretically the money supply by 5 through what it lends the amount that a bank can lend from its checkable deposits demand accounts against which checks drafts or other financial instruments can be negotiated depends on the fed s reserve requirement this is fractional reserve banking at work if the reserve requirement is 20 the bank can lend out 80 of money on deposit investopedia sabrina jiangdeposit multiplier vs money multiplierthe deposit multiplier is frequently confused with the money multiplier although the two terms are closely related they are are distinctly different and not interchangeable the money multiplier reflects the change in a nation s money supply created by the loan of capital beyond a bank s reserve 2 it can be seen as the maximum potential creation of money through the multiplier effect of all bank lending the deposit multiplier provides the basis for the money multiplier but the money multiplier value is ultimately less that s because of excess reserves savings and conversions to cash by consumers banks may keep reserves beyond the requirements set by the federal reserve in order to reduce the number of its checkable deposits this can reduce the amount of new money it injects into the nation s money supply | |
what is fractional reserve banking | it s a system of banking whereby a portion of all money deposited is held in reserve to protect the daily activities of banks and ensure that they are able to meet the withdrawal requests of their customers the amount not in reserve can be loaned to borrowers this continually adds to the nation s money supply and supports economic activity the fed can use fractional reserve banking to affect the money supply by changing its reserve requirement | |
how does the deposit multiplier relate to the money supply | the deposit multiplier is an indicator of how much a bank s lending activity can add to the money supply essentially banks multiply deposits throughout the country by lending money to borrowers who then deposit the money in their own bank accounts the deposit multiplier represents the amount of money that can be created based on a single unit held in reserve the higher the fed s reserve requirement the smaller the deposit multiplier and the less of an increase in deposits created through lending | |
how do you calculate the deposit multiplier | take the federal reserve s reserve requirement for banks divide that figure into 1 the result is the amount of new money that could be created so say the fed s reserve requirement is 18 the deposit multiplier would be 1 18 or 5 55 that means for every 1 in bank reserves 5 55 could be added to the money supply the lower the reserve requirement the greater the amount of money that can be created because more money is available to be lent | |
what is a deposit slip | a deposit slip is a small paper form that a bank customer includes when depositing funds into a bank account a deposit slip states the date the name of the depositor the depositor s account number and the amounts being deposited | |
how deposit slips work | a customer can typically find a stack of deposit slips when entering a bank with designated spaces where they can fill in the required information to complete the deposit a customer is required to fill out the deposit slip before approaching the bank teller to deposit funds the account number must be written at the bottom of the slip where indicated if the customer uses a deposit slip provided by the bank the deposit slip informs the teller of the bank account number to which the funds should be credited customers can request a copy of their deposit if necessary including the itemized amounts that made up the total deposit if there s a dispute with the bank the slip also breaks down whether the deposit consists of checks cash or if the depositor wants a specific amount of cash back from a check deposit the bank clerk typically verifies the funds received for the deposit against the amounts listed on the deposit slip to ensure that they match the teller processes the slip along with the items in the deposit and prints a receipt for the customer deposit slips are often included in the back of checkbooks these have the customer s account number and the bank routing number pre printed on them so there s no need to fill out one of the blank slips provided by the banking institution you need only enter the details of the deposit you re making benefits of deposit slipsdeposit slips protect both the bank and the customer banks use them to help maintain a written ledger of funds deposited throughout the day and to ensure that no deposits are unaccounted for at the end of the business day for bank customers a deposit slip serves as a de facto receipt that the bank properly accounted for the funds and deposited the correct amount into the correct account the deposit slip serves as proof that the bank acknowledged receiving the funds from the customer if the customer later checks the account balance and discovers the deposit was not reported correctly the deposit receipt proves that the deposit was made but the receipt only shows the total of the deposit | |
is there any way to avoid using a deposit slip to deposit money | many major banks allow you to make mobile deposits if you re depositing a check simply take a picture of the check on your phone then submit it as a deposit using your bank s mobile app you must typically enroll with your bank to use the app and some banks may enforce limits as to how much you can deposit this way | |
what is a bank routing number | a routing number is made up of nine digits that identify your bank to other banks it will typically be printed on deposit slips that come with your checkbook and it may even appear on blank deposit slips that you can pick up at your bank 1 | |
do banks have to keep a record of deposit slips | banks are required by federal law to keep records of deposits exceeding 100 for at least five years they have the option of keeping them longer but these records can be and typically are digital not paper copies 2the bottom linedeposit slips are becoming a thing of the past as banks have begun removing them from their branches in favor of new technology most banks don t require deposit slips for atm deposits because the computer can read the check or count the cash and electronically credit the account associated with the atm card atm deposit receipts are available before completing the deposit including receipts that contain images of the checks being deposited smartphone technology has advanced in that banks are offering apps that enable customers to scan paper checks instead of depositing them via a bank teller or atm | |
what is a deposition | in law a deposition is an integral part of the discovery process it is testimony made under oath and taken down in writing by an authorized officer of the court typically in an out of court setting and before trial understanding depositionsthe discovery process enables both sides involved in a legal case to unearth all the pertinent facts and learn about the other side s view of the case so as to map out an effective legal strategy depositions are usually taken from key witnesses but can also involve the plaintiff or defendant and often take place in an attorney s office rather than the courtroom the individual making the deposition is known as the deponent since the deponent is under oath false statements can carry civil and criminal penalties as with any discovery proceeding the primary objective of a deposition is to give all parties involved in the litigation a fair preview of the evidence and level the field as far as information is concerned so that there are no unwelcome surprises at trial a deposition also preserves the testimony of the witness if it is taken in a relatively short time period after the occurrence of the crime or accident since a trial may be months away and the witness s recollection of the event may get blurred with the passage of time | |
when to depose | a deposition would be required for instance if one were to witness an accident that resulted in a liability lawsuit all parties involved in the case are permitted to attend the deposition the deponent will be asked a number of questions related to the lawsuit by the attorneys on both sides a court reporter who is present accurately records every question and answer in the deposition and produces a transcript that can later be used at trial due to the exhaustive questioning that is characteristic of depositions they may last several hours under the federal rules of civil procedure and its state equivalents a deposition must take a maximum of seven hours per day for each deponent in canada the deposition process is called examination for discovery and examinations for discovery are limited to 7 hours per party conducting the examination 1deposition questionsquestions asked at a deposition can be more wide ranging than those that may be allowed in courtroom proceedings for example a witness to an automobile accident may be asked a series of questions such as as depositions are a critical part of the litigation process and can significantly affect the outcome of a trial legal professionals strive to adequately prepare their clients for depositions while deponents are required to be scrupulously honest in their answers to questions the objective is to avoid common mistakes made by deponents these mistakes may include saying too much thereby providing information that can be used to the advantage by the opposing side another common mistake is making guesses or assumptions since deponents are required to stick to the facts and not speculate or theorize | |
how long does a deposition take | the length of a deposition will depend on the scope of the questions the details needed and the willingness to participate by the person being deposed in general a deposition can last as little as 30 minutes to more than eight hours spread over multiple sessions 2 | |
what happens after a deposition | after a deposition has been finished transcriptions and or video recordings of the testimony are sent to both sides lawyers for review and analysis the depositions along with other evidence collected during the discovery period will either lead to a settlement out of court or a trial can you refuse a deposition if you are subpoenaed to sit for a deposition you must show up by law and answer the questions honestly and to the best of your knowledge failure to show up could result in imprisonment for contempt of court and forced into a deposition there lying under oath can result in the crime of perjury | |
what is a depository | the term depository can refer to a facility in which something is deposited for storage or safeguarding or an institution that accepts currency deposits from customers such as a bank or a savings association a depository also can be an organization bank or institution that holds securities and assists in the trading of securities deposits placed in a depository must be returned in the same condition upon request depositories provide security and liquidity in the market they use money deposited for safekeeping to lend to others they invest in other securities and they provide a funds transfer system understanding depositoriesdepositories are buildings offices and warehouses that allow consumers and businesses to deposit money securities and other valuable assets for safekeeping depositories may include banks safehouses vaults financial institutions and other organizations depositories serve multiple purposes for the general public first they eliminate the owner s risk of holding physical assets by providing a safe place to store them for instance banks and other financial institutions give consumers a place to deposit their money by offering time deposit and demand deposit accounts a time deposit is an interest bearing account with a specific date of maturity such as a certificate of deposit cd a demand deposit account holds funds until they need to be withdrawn such as with a checking or savings account deposits can also be securities such as stocks or bonds when these assets are deposited the institution holds the securities either in electronic form also known as book entry form or in paper form such as a physical stock certificate depository organizations also help create liquidity in the market customers give their money to a financial institution the company holds it for a time and returns it when the customer wants it back these institutions accept customers money and pay interest on their deposits over time while holding the customers money the institutions lend it to others in the form of mortgage or business loans generating more interest on the money loaned than the interest they paid to customers example of a depositoryeuroclear is a clearinghouse that acts as a central securities depository for its clients many of whom trade on european exchanges most of its clients are banks broker dealers and other institutions professionally engaged in managing new issues of securities market making trading or holding a wide variety of securities 1euroclear settles domestic and international securities transactions covering bonds equities derivatives and investment funds domestic securities from more than 40 markets are accepted in the system covering a broad range of internationally traded fixed and floating rate debt instruments convertibles warrants and equities 21 this includes domestic debt instruments short and medium term instruments equities and equity linked instruments and international bonds from the major markets of europe asia pacific africa and the americas special considerationstransferring the ownership of shares from one investor s account to another account when a trade is executed is one of the primary functions of a depository this helps reduce the paperwork for executing a trade and speeds up the transfer process another function of a depository is the elimination of the risk of holding the securities in physical form these risks can include theft loss fraud damage or delay in deliveries an investor who wants to purchase precious metals can purchase them in physical bullion or paper form gold or silver bars or coins can be purchased from a dealer and kept with a third party depository investing in gold through futures contracts is not equivalent to the investor owning gold instead gold is owed to the investor a trader or hedger looking to take actual delivery on a futures contract must first establish a long buy futures position and wait until a short seller tenders a notice to delivery with gold futures contracts the seller is committing to deliver the gold to the buyer at the contract expiry date the seller must have the metal in this case gold in an approved depository this is represented by holding comex approved electronic depository warrants which are required to make or take delivery 3types of depositoriesthe three main types of depository institutions are credit unions savings institutions and commercial banks the main source of funding for these institutions is through deposits from customers customer deposits and accounts are insured by the federal deposit insurance corporation fdic up to certain limits 4a depository s institutional function or type determines which agency or agencies are responsible for its oversight credit unions are nonprofit companies highly focused on customer services customers make deposits into a credit union account which is similar to buying shares in that credit union credit union earnings are distributed in the form of dividends to every customer savings institutions are for profit companies also known as savings and loan institutions these institutions focus primarily on consumer mortgage lending but may also offer credit cards and commercial loans customers deposit money into an account which buys shares in the company for example a savings institution may approve 71 000 mortgage loans 714 real estate loans 340 000 credit cards and 252 000 auto and personal consumer loans while earning interest on all these products during a single fiscal year commercial banks are for profit companies and are the largest type of depository institutions these banks offer a range of services to consumers and businesses such as savings accounts consumer and commercial loans credit cards and investment products these institutions accept deposits and primarily use the deposits to offer mortgage loans commercial loans and real estate loans depository vs repositorya depository is not the same thing as a repository although they can often be confused a repository is where things are kept for safekeeping but unlike a depository the items kept in a repository are generally abstract such as knowledge for instance data can be kept in a software repository or a central location where files are housed investopedia is also considered a repository in this case it s a repository for financial information | |
what is a depository institution | a depository institution is a financial institution whose main source of funds is deposits from customers a commercial bank is a type of depository institution as is a credit union or a savings and loan association | |
what is a non depository financial institution | a non depository institution is a type of financial institution that does not primarily rely on customer deposits for its main income instead it acts as a third party to financial transactions one example of a non depository institution is a life insurance company insurance companies accept payment for insurance products but they do not typically hold funds for safekeeping as a depository does | |
what are the benefits of a depository institution | there are several advantages to using a depository institution such as a bank first depositories provide safekeeping for assets cash and valuables eliminating the risk of theft and loss they typically pay interest on your deposits which will grow your balance depositories also create liquidity by lending out money the bottom linea depository is a place to deposit or place assets such as cash or securities depository institutions can include banks credit unions and savings and loans institutions when you place your funds in a depository the organization often will pay you interest on your deposit it may also loan out those funds in the form of mortgages or personal loans however a depository must return your deposit when you request it the federal deposit insurance corporation guarantees your deposits at participating institutions up to certain limits | |
what is a depositary receipt dr | a depositary receipt dr is a negotiable certificate issued by a bank it represents shares in a foreign company traded on a local stock exchange and gives investors the opportunity to hold shares in the equity of foreign countries it gives them an alternative to trading on an international market a depositary receipt was originally a physical certificate that allowed investors to hold shares in the equity of other countries one of the most common types of drs is the american depositary receipt adr which has been offering companies investors and traders global investment opportunities since the 1920s 1understanding depositary receipts dr a depositary receipt allows investors to hold shares in stocks of companies that are listed on exchanges in foreign countries a depositary receipt avoids the need to trade directly with the stock exchange in the foreign market investors instead transact with a major financial institution within their home country this typically reduces fees and is far more convenient than purchasing stocks directly in foreign markets 2american depositary receiptsinvestors can gain access to foreign stocks via american depositary receipts adrs in the united states adrs are issued only by u s banks for foreign stocks that are traded on a u s exchange including the american stock exchange amex nyse or nasdaq the receipt is listed in u s dollars when an investor purchases an american depositary receipt a u s financial institution overseas rather than a global institution holds the actual underlying security 3adrs are a great way to buy shares in a foreign company while earning capital gains and possibly being paid dividends which are cash payments by the companies to shareholders both capital gains and dividends are paid in u s dollars adr holders don t have to transact in foreign currencies because adrs trade in u s dollars and clear through u s settlement systems the u s banks require that the foreign companies provide them with detailed financial information making it easier for investors to assess the company s financial health compared to a foreign company that only transacts on international exchanges an example of an adricici bank ltd is listed in india and is typically unavailable to foreign investors but icici bank has an american depositary receipt issued by deutsche bank that trades on the nyse which most u s investors can access 4 this provides it with much wider availability among investors gain more insight about depositary receipts from our in depth tutorial on adr basics global depositary receiptsdepositary receipts have spread to other parts of the globe in the form of global depositary receipts gdrs european drs and international drs adrs are traded on a u s national stock exchange but gdrs are commonly listed on european stock exchanges such as the london stock exchange both adrs and gdrs are usually denominated in u s dollars but they can also be denominated in euros a gdr works similarly to an adr but in reverse a u s based company that wants its stock to be listed on the london stock exchange can accomplish this via a gdr the u s based company enters into a depositary receipt agreement with the london depository bank in turn the london bank issues shares in britain based on the regulatory compliance for both countries 5advantages of depositary receiptsdepositary receipts can be attractive to investors because they allow them to diversify their portfolios and purchase shares in foreign companies diversification is an investment strategy in which a portfolio is constructed so it contains a wide variety of stocks in multiple industries diversifying using depository receipts along with other investments prevents a portfolio from being too heavily concentrated in one holding or sector depositary receipts provide investors with the benefits and rights of the underlying shares which can include voting rights and dividends they can open up markets that investors wouldn t have access to otherwise depositary receipts are more convenient and less expensive than purchasing stocks in foreign markets adrs help reduce the administration and duty costs that would otherwise be levied on each transaction depositary receipts help international companies raise capital globally and encourage international investment disadvantages of depositary receiptsone of the disadvantages of depository receipts is that investors may find that many aren t listed on a stock exchange they may only have institutional investors trading them another potential downside to depositary receipts is their relatively low liquidity there aren t many buyers and sellers and this can lead to delays in entering and exiting a position they may also come with significant administrative fees in some cases depositary receipts such as adrs don t eliminate currency risk for the underlying shares in another country dividend payments in euros are converted to u s dollars net of conversion expenses and foreign taxes the conversion is done in accordance with the deposit agreement fluctuations in the exchange rate could impact the value of the dividend payment investors still face economic risks because the country in which the foreign company is located could experience a recession bank failures or political upheaval the value of depository receipt would fluctuate as a result along with any heightened risks in the foreign county 6there are also risks with attending securities that aren t backed by a company the depositary receipt may be withdrawn at any time and the waiting period for the shares being sold and the proceeds distributed to investors can be long frequently asked questions | |
how is a depositary receipt transaction accomplished | a foreign listed company typically hires a financial advisor to help it navigate regulations when it wants to create a depositary receipt abroad the company also generally uses a domestic bank to act as the custodian and a broker in the target country the domestic bank will list shares of the firm on an exchange such as the new york stock exchange nyse in the country where the firm is located 3 | |
how are depositary receipts taxed | dividends and gains earned on american depositary receipts are paid in u s dollars net of expenses and foreign taxes most banks withhold to cover foreign taxes but the full income is still reportable and potentially taxable on your u s tax return potentially resulting in double taxation unless steps are taken to prevent this 7 | |
what is a sponsored adr | a depositary bank works with a foreign company and its custodian bank with a sponsored american depositary receipt adrs are otherwise issued by brokers or dealers that own common stock in the foreign company unsponsored adrs aren t commonly available on exchanges 3the bottom lineyou can avoid trading directly with foreign stock exchanges by purchasing depositary receipts but drs come with both pros and cons they re convenient and they can be less expensive than trading directly because the fees are often reduced but your investment can be impacted by economic risks and circumstances in the foreign country and drs aren t particularly liquid trades you make can be subject to some delays so you ll want to be sure that you can weather these circumstances | |
what is a depository transfer check | a depository transfer check dtc is used by a designated collection bank to deposit the daily receipts of a corporation from multiple locations depository transfer checks are a way to ensure better cash management for companies which collect cash at multiple locations data is transferred by a third party information service from each location from which dtcs are created for each deposit location this information is then entered into the check processing system at the destination bank for deposit understanding depository transfer checksdepository transfer checks are used by companies to collect revenue from multiple locations which are then deposited in one lump sum at a bank or other institution they are also called depository transfer drafts the third party information service used to transfer the data does so through a concentration bank a concentration bank is the organization s primary financial institution or where it conducts the majority of its financial transactions the concentration bank then creates dtcs for each deposit location which is entered into the system a depository transfer check looks like a personal check except that depository transfer check is written across the top center of the face of the check these instruments are non negotiable and do not bear a signature dtcs are not to be confused with overnight deposits businesses are given a key for a secured dropbox deposits which are placed in a bag with deposit slips are dropped off in this dropbox after business hours the bank opens the drop box in the morning and deposits the overnight deposit into the business checking account dtcs vs automatic clearing house ach systemsdtc based systems have slowly been replaced by automatic clearing house ach ach systems are electronic funds transfer systems that generally deal with payroll direct deposit tax refunds consumer bills and other payment systems in the united states roughly 14 4 billion deposits and 10 3 billion credits were made via ach in 2019 which are considered to be faster cheaper and more efficient 1 firms that are not part of an ach network must still use dtcs special considerationsas noted above depository transfer checks enable companies to better manage their inflows corporate cash management is generally managed by a corporate treasurer this function is important in companies with high incoming and outgoing cash flows combined with low profit margins examples of those industries are downstream oil and gas leading players are bp shell exxon total and mass retailers such as walmart amazon h m zara and home depot for example goldman sachs has a robust treasury team to ensure its cash is managed in a manner that maintains its value and mitigates several key risks related to changes in interest rates credit currency commodities and operations cash management is critical to ensuring a company s financial stability and solvency or its ability to meet its long term financial obligations dtcs and achs can help some organizations track cash inflows these systems often help organize accounts receivable ar along with collection rates | |
what is the depository trust and clearing corporation dtcc | the depository trust and clearing corporation dtcc is an american financial services company founded in 1999 that provides clearing and settlement services for the financial markets when the dtcc was established in 1999 it combined the functions of the depository trust company dtc and the national securities clearing corporation nscc 1 the nscc is currently a subsidiary of the dtcc 2 | |
how the depository trust and clearing corporation dtcc works | the dtcc processes trillions of dollars of securities on a daily basis as the centralized clearinghouse for various exchanges and equity platforms the dtcc settles transactions between buyers and sellers of securities and plays a critical role in automating centralizing standardizing and streamlining the world s financial markets 4for example when an investor places an order through their broker and the trade is made between that broker and another broker or similar financial professional information about that trade is sent to the nscc or an equivalent clearinghouse for clearinghouse services after the nscc has processed and recorded the trade using continuous net settlement cns they provide a report to the brokers and financial professionals involved this report includes their net securities positions after the trade and the money that is due to be settled between the two parties at this point the nscc provides settlement instructions to the depository trust company dtc a securities depository the dtc transfers the ownership of the securities from the selling broker s account to the account of the broker who made the purchase the dtc is also in charge of transferring funds from the buying broker s account to the account of the broker who made the sale the broker is then responsible for making the appropriate adjustments to the client s account this entire process typically happens the same day the transaction occurs the process for institutional investors is similar to the process for retail investors 5the dtcc settles the vast majority of securities transactions in the u s settlement is an important step in the completion of securities transactions 3 by ensuring that trades are executed properly and on time the settlement process contributes to investor confidence and reduces market risk timely and accurate trades guarantee that investors won t lose their money with solvent brokerage firms or other intermediaries 5the dtcc provides clearance settlement and information services for a wide range of securities products including government and mortgage backed securities corporate and municipal bonds derivatives mutual funds money market instruments alternative investment products and insurance products at times clearing corporations may earn clearing fees by acting as a third party to a trade for example a clearinghouse may receive cash from a buyer and securities or futures contracts from a seller the clearing corporation then manages the exchange and collects a fee for this service the size of the fee is dependent on the size of the transaction the level of service required and the type of instrument being traded investors who make several transactions in a day can generate significant fees in the case of futures contracts specifically clearing fees can accumulate for investors because long positions can spread the per contract fee out over a longer period of time history of the dtccthe national securities clearing corporation currently a subsidiary of the dtcc was originally founded in 1976 6 before the nscc was founded stock exchanges would close once a week to complete the lengthy task of processing paper stock certificates the large volume of trading overwhelmed brokerage firms and many chose to close every wednesday in addition to shortening trading hours on other days of the week 7brokers had to physically exchange certificates which required them to employ people to carry certificates and checks the process for transferring securities also relied heavily on physical recordkeeping the exchange of physical stock certificates was difficult inefficient and increasingly expensive to overcome this problem two changes were made first it was recommended that all paper stock certificates were stored in one centralized location and that the process become automated by keeping electronic records of all certificates that indicated changes of ownership and other securities transactions this eventually led to the development of the depository trust company dtc in 1973 8second multilateral netting was proposed in a multilateral netting process multiple parties arrange for transactions to be summed rather than settling them individually all of this netting activity is centralized to reduce the amount of invoicing and payment settlements in response to this proposal of multilateral netting the nscc was formed in 1976 6depository trust company dtc vs the national securities clearing corporation nscc the depository trust company dtc is a subsidiary of the dtcc and is responsible for settling securities trades moving securities for nscc net settlements processing corporate actions underwriting and other services the dtc s settlement services result in reduced costs and increase efficiencies by serving as the central repository for millions of active securities and facilitating ownership changes for securities 8the national securities clearing corporation nscc another subsidiary of the dtcc provides clearing settlement risk management and other financial services regulated by the securities exchange commission sec the nscc also provides multilateral netting whereby transactions among several parties are summed up centrally rather than individually 2 | |
what does the dtcc do | the dtcc is an american financial services company that provides clearing and settlement services for the financial markets through its subsidiaries it provides clearing asset servicing settlements and other financial services who is dtcc owned by the participants of the clearing agencies hold the dtcc s common shares and are therefore its owners 9 | |
what is the difference between dtc and dtcc | the dtcc is the parent institution of the depository trust company dtc a securities depository a member of the u s federal reserve system the dtc provides settlement services asset servicing and clearing services 8the bottom linethe depository trust and clearing corporation dtcc is a financial services company that provides clearing and settlement services for financial markets it is also instrumental in the automation centralization standardization and streamlining of said markets for its subsidiaries including the depository trust company dtc and the national securities clearing corporation nscc it oversees operations and manages financial risks | |
what is the depository trust company dtc | the depository trust company dtc is one of the world s largest securities depositories founded in 1973 and based in new york city the dtc is organized as a limited purpose trust company and provides safekeeping through electronic record keeping of securities balances it also acts as a clearinghouse to process and settle trades in corporate and municipal securities | |
how the depository trust company dtc works | the depository trust company dtc is registered with the securities and exchange commission sec is a member of the u s federal reserve system and was created to reduce costs and provide clearing and settlement efficiencies by immobilizing securities and making book entry changes to the ownership of the securities 2the largest broker dealers and banks in the united states are dtc participants and they deposit and hold securities at the dtc which appear in the records of an issuer s stock as the sole registered owner of those securities deposited at the dtc the dtc provides financial institutions with a record of net settlement obligations at the end of each day from trading in equity debt and money market instruments in 2021 the dtc held more than 1 3 million current securities issues valued at 87 trillion and issued in the u s and 131 countries and territories 1history of the dtcin 1968 as the new york stock exchange nyse became overwhelmed by the paperwork involved with trade volume it installed the functions of dts or maintenance of daily share prices through its central certificate service ccs a securities depository established to serve nyse member firms dtc was created in early 1973 to acquire the business of ccs and to expand the benefits of the depository approach to other areas of the financial industry particularly the bank sector 3the depository trust and clearing company dtcc owns the dtc and manages risk in the financial system formerly an independent entity the dtc was consolidated with several other securities clearing companies in 1999 and became a subsidiary of the dtcc the dtc has allowed the new york stock exchange to increase its trade volume to billions per day functions of the dtcthe dtc holds trillions of dollars worth of securities in custody including corporate stocks and bonds municipal bonds and money market instruments individuals do not interact with the dtc but securities brokers dealers institutional investors depository institutions issuing and paying agents and settling banks do owned by many companies in the financial industry with the nyse being one of its largest shareholders the dtc provides services including | |
what is a dtc clearing number | the dtc number is a number that helps facilitate transactions between financial institutions the dtc number is typically associated with the clearing firm that is used by your ira custodian to confirm your custodian s dtc number please contact your current ira custodian | |
what does dtc eligibility mean | a dtc eligible security is a security that is freely tradable pursuant to u s securities laws and is otherwise qualified to be held at dtc and serviced the eligibility criteria are more fully described in dtc s operational arrangements | |
what is the dtcc | dtcc and its family of companies including its subsidiary dtc serve as the post trade market infrastructure in the industry providing automation centralization standardization and streamlining of processes critical to the markets safety and security 4 | |
how does dtcc and dtc monitor for money laundering | dtcc and its subsidiary dtc employ a kyc program to provide a risk based approach for the collection of sufficient information and documentation to know its customers and the customers of its subsidiaries as required by u s and international aml regulations 4 | |
when dtc chills or freezes a security it will issue a participant notice to its participants these notices are publicly available on dtc s website when securities are frozen dtc provides optional automated notifications giving participants the ability to update their systems to automatically block future trading of affected securities in addition to alerting participant compliance departments | the bottom linethe depository trust company dtc is a limited purpose trust company and subsidiary of dtcc it provides safekeeping through electronic record keeping of securities balances and acts as a clearinghouse to process and settle trades in corporate and municipal securities |
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