Credit cards are a popular means of payment. Why are credit card accounts not included in M1 or M2? Are credit cards of no relevance to these money measures?
What will be an ideal response?
A purchase using a credit card is the same as taking out a loan. In the transaction, no medium of exchange passes between the buyer and the seller. At a later time, the seller receives a payment, and the buyer must give a corresponding amount to the credit card issuer. The use of credit cards does tend to reduce M1 relative to M2, since many transactions can be covered by a single monthly payment on ones credit card account, reducing the desired quantities of cash and checking account balances.
You might also like to view...
Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________.
A. Rising; A B. Falling; A; C C. Falling; B: C D. Rising; A; C
Adaptive expectations are formed ________
A) from experience B) from best guesses about the future C) as new information becomes available D) as a weighted average of expert forecasts
The elasticity of supply coefficient for lobster is estimated to be equal to 0.6 . It is expected, therefore, that a 10% decrease in price would lead to:
a. a 6% decrease in the quantity of lobsters supplied. b. a 6% increase in the quantity of lobsters supplied. c. a 10% decrease in the quantity of lobsters supplied. d. a 10% increase in the quantity of lobsters supplied.
Historically, when a diverse set of stocks is held over a lengthy time period, stocks have yielded a ____ rate of return, and the variation in the rate of return has been ____
a. low; low b. low; high c. high; low d. high; high