What Are the Pros and Cons of Fixed Deposits?

The so-called time deposit ratio refers to the ratio of commercial banks' time deposits to demand deposits. It reflects the public's willingness to portfolio.

Fixed deposit ratio

Right!

The so-called time deposit ratio refers to the ratio of commercial banks' time deposits to demand deposits. It reflects the public's willingness to portfolio.

Time deposit ratio (t) refers to the ratio of time deposit liabilities to demand deposit liabilities of commercial banks held by non-banking sectors.

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The main factors affecting the fixed deposit ratio are:
1. Time deposit interest rate. The increase in this interest rate will prompt bank customers to adjust their financial asset structure, which will increase the relative amount of time deposits, and vice versa.
2. Changes in income from other financial assets. Relatively higher returns on other financial assets will reduce the incentive for people to hold time deposits, bank customers will reduce the amount of time deposits, and the time deposit ratio will decrease.
3. Changes in public income levels. General income has increased and the time deposit ratio has also increased. Otherwise it is low.

In economic operation, the level of t is mainly affected by the following factors:

Non-bank sector disposable income (Y), when other variables are constant, it should be said that t is an increasing function of Y;
The opportunity cost of holding a time deposit (Pt), when other variables are constant, it should be said that t is a decreasing function of Pt;
When the interest rate (It) of the time deposit is constant, it should be said that t is an increasing function of It.