What is money and what is not money, Macroeconomics

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What is money and what is not money

If you are trying to conclude if something is money, simply consider whether it would be accepted in most stores as payment. You then realize that bonds, stocks, foreign currency or gold are not money. These should first be exchanged for the national currency before you can use them for consumption. Consider that in some cases, foreign currency would be money. For illustration, in some border towns, currency of the bordering country may be accepted virtually everywhere.

You also realize that some bank deposits are money. If you have money in an account in a bank as well as a debit card, you can pay for service and goods using that card in most places. Funds are withdrawn directly from your account when you make purchase that makes deposits as good as cash in your pocket. Counting deposits as money is too consistent with idea that money measures how much is available for immediate consumption.

Not all deposits can be counted as money. With most savings accounts, you can't connect the account to a debit card and these deposits must not be counted as money

 


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