Cryptocurrency Q&A
Is a credit card M1 or M2?
Is a credit card M1 or M2?
Leonardo
Tue Oct 08 2024
|
5 answers
759
I'm curious, when we're discussing the classification of money supply, would a credit card be considered part of M1 or M2? M1, as I understand, includes the most liquid forms of money such as cash and checking account balances. While M2 is a broader category that encompasses M1 plus savings deposits, small-denomination time deposits, and retail money market mutual fund shares. How does a credit card, which essentially allows for borrowing against a line of credit, fit into this classification? Is it more akin to the readily available funds of M1, or does it fall under the broader umbrella of M2 due to its connection to savings and investment vehicles?
5 answers
Pietro
Thu Oct 10 2024
This exclusion stems from the nature of credit card transactions, which do not constitute a direct addition to the money supply. Instead, purchases made with credit cards represent a loan extended by the credit card company to the cardholder.
Was this helpful?
262
67
Martina
Thu Oct 10 2024
The classification of money supply is a crucial aspect in understanding the monetary system. In the context of M1 and M2, credit cards are notably excluded.
Was this helpful?
56
62
Valentina
Wed Oct 09 2024
M1 money, on the other hand, comprises the most liquid forms of money in an economy. It includes physical currency, which is readily available for spending, as well as demand deposits held in checking accounts.
Was this helpful?
259
83
Tommaso
Wed Oct 09 2024
Debit cards and ATMs play a pivotal role in facilitating the use of M1 money. Debit cards enable individuals to access and spend funds directly from their checking accounts, while ATMs provide a convenient way to withdraw cash.
Was this helpful?
132
24
Michele
Wed Oct 09 2024
BTCC, as a leading cryptocurrency exchange, offers a range of services that cater to the evolving needs of the digital asset market. Among these are spot trading, which allows for the direct exchange of cryptocurrencies, and futures trading, which offers Leveraged exposure to market movements.
Was this helpful?
50
78
