6. ACCEPTABILITY • Acceptability means that everyone must be able to use the money for transactions. • Money is universally accepted anywhere in the world as a universal mean for transaction. 7. UNIFORMITY • Able to count and measure money Accurately.
Motives of the Money Requirement Transaction Motives – Income, Business other activities The transactions motive for demanding money arises from the fact that most transactions involve an exchange of money. Because it is necessary to have money available for transactions, money will be demanded. Precautionary Motives – Contingencies People often demand money as a precaution against an uncertain future. The need to have money available in such situations is referred to as the precautionary motive for demanding money. Speculative Motives – Money Market The speculative motive for demanding money arises in situations where holding money is perceived to be less risky than the alternative of lending the money or investing it in some other asset.
Near Monies Near money , also known as quasi - money , refers to highly liquid assets that can rapidly be converted into cash such as short-term money market instruments and bank deposits. ... Near money means non- cash assets that are very liquid but cannot be used directly for transactions.
Difference between Money & Near Money Unit of Account – money is a unit or account, it is a common measure of value. Prices in shops, for example, are expressed in terms of money. Near money has no such function. In fact, near money’s own value is expressed in terms of money. Making Transactions – we use money directly for making transactions, while near money is an indirect medium of exchange – we need to convert it into money first before it can be used for transactions. Liquidity – money is 100% liquid, near money is not. Converting near-money involves time, and sometimes a fee (exchanging currency, or paying a penalty for taking your money out before the agreed date).
Types of Near Money 1. Savings accounts. 2. Money funds. 3. Bank time deposits (certificates of deposit) 4. Government treasury securities (such as T-bills) 5. Bonds near their redemption date. 6. Foreign currencies, especially widely traded ones such as the US dollar, euro or yen.
Types of Near Money 1 Savings accounts. A savings account is a deposit account held at a retail bank that pays interest but cannot be used directly as money in the narrow sense of a medium of exchange (for example, by writing a cheque). These accounts let customers set aside a portion of their liquid assets while earning a monetary return.
Types of Near Money 2 Money funds. A money market fund (also called a money market mutual fund ) is an open-ended mutual fund that invests in short-term debt securities such as Treasury bills. Money market funds are widely (though not necessarily accurately) regarded as being as safe as bank deposits yet providing a higher yield.
Types of Near Money 3 Bank time deposits (certificates of deposit) A time deposit or term deposit (also known as a certificate of deposit in the United States) is a deposit with a specified period of maturity and earns interest. It is
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- Spring '20
- Monetary Policy