Money: The Key to Understanding Financial Systems
Which combination of assets is considered to be money?
A. Currency in circulation and in bank vaults, checkable bank deposits, and traveler's checks
B. Currency in circulation and in bank vaults, checkable bank deposits, and credit cards
C. Currency in circulation, checkable bank deposits, and credit cards
D. Currency in circulation, checkable bank deposits, and traveler's checks
Answer:
Currency in circulation and in bank vaults, checkable deposits and travelers' check
Money is defined as a generally accepted medium of exchange and a measure of the value of goods and services. One key property of money is liquidity, meaning that an asset must easily be converted to cash in a short amount of time to be considered money. Money must also be durable, divisible, portable, and valuable.
The correct combination of assets that is considered to be money is currency in circulation and in bank vaults, checkable deposits, and traveler's checks. This is because these assets meet the criteria of being easily exchangeable, durable, divisible, portable, and valuable.
When it comes to categorizing money, M1 is the most commonly used measure. M1 includes coins and currency in circulation, checkable (demand) deposits, and traveler's checks. These components make up the most liquid forms of money that are widely accepted in financial transactions.