Statement: Should there be only one rate of interest nor term deposits of varying durations in banks? Arguments: I. No, People will refrain from keeping money for longer duration resulting into reduction of liquidity level of banks. II Yes. This will be much simple for the common people and they may be encouraged to keep more money in banks.
Correct Answer: if only arhument I is strong
Explanation:
Clearly, the proposed scheme would discourage people from keeping deposits for longer durations (the rate of interest being the same for short durations) and not draw in more funds. So, only argument I holds.
