Which of the Following Lists Is Included in What Economists Call “Money”?
Money is a fundamental concept in economics, representing a medium of exchange, a unit of account, and a store of value. Economists have classified different types of money based on their characteristics and functions. In this article, we will discuss the lists that economists consider as “money” and explore the various forms it can take.
1. Currency: This includes physical notes and coins issued by the government and central banks. Currency is widely accepted as a medium of exchange and serves as legal tender in a country.
2. Demand deposits: These are funds held in checking accounts at banks or other financial institutions. They are considered money because they can be withdrawn on demand and used for transactions.
3. Traveler’s checks: Although less common today, traveler’s checks were once widely used as a secure form of money. They are pre-printed checks that can be used as cash or exchanged for local currency.
4. Certificates of deposit (CDs): These are time deposits with a fixed term and interest rate offered by banks. While CDs are not typically used as a medium of exchange, they are included in the broader definition of money as they can be easily converted into demand deposits or currency.
5. Money market accounts: These are interest-bearing accounts offered by banks and other financial institutions. While similar to demand deposits, money market accounts often have higher minimum balance requirements and limited check-writing privileges.
6. Savings accounts: Although primarily used for saving rather than daily transactions, savings accounts are also included in the broader definition of money. They offer interest on deposited funds and can be easily converted into demand deposits.
7. Money market mutual funds: These are investment funds that invest in short-term debt securities, such as Treasury bills and commercial paper. While not traditionally considered money, they are highly liquid and can be easily converted into currency or demand deposits.
8. Digital currencies: With the rise of technology, digital currencies like Bitcoin have gained popularity. While not issued or regulated by governments, they function as a medium of exchange and are considered money by some economists.
1. Is credit card debt considered money? No, credit card debt represents a liability for the cardholder rather than money.
2. Are stocks and bonds considered money? No, stocks and bonds represent ownership in a company or a debt instrument, respectively, and are not generally accepted as a medium of exchange.
3. Can cryptocurrencies like Bitcoin be considered money? Some economists consider cryptocurrencies as money due to their ability to function as a medium of exchange, although they are not issued or regulated by governments.
4. Are precious metals like gold considered money? While historically gold and other precious metals have been used as money, they are not widely accepted as a medium of exchange in modern economies.
5. Are personal checks considered money? Personal checks are not considered money as they represent a promise to pay rather than immediate funds.
6. Can gift cards be considered money? Gift cards are not generally considered money as they can only be redeemed at specific stores or establishments.
7. Are loans considered money? Loans represent a liability for the borrower and an asset for the lender, rather than being considered money.
8. Is virtual currency in video games considered money? Virtual currency in video games is specific to the game and cannot be used as a medium of exchange outside of the game’s environment.
In conclusion, economists classify money based on its characteristics and functions. The lists that economists consider as “money” include currency, demand deposits, traveler’s checks, certificates of deposit, money market accounts, savings accounts, money market mutual funds, and digital currencies. Other forms such as credit card debt, stocks, bonds, precious metals, personal checks, loans, and virtual currency in video games are not considered money in the same sense.