Near money includes assets that cannot be used as a medium of exchange but can be converted into cash or checkable deposits.

Near money includes assets that cannot be used as a medium of exchange but can be converted into cash or checkable deposits.

• A. True
• B. False
• C. Only for forecasting
• D. Irrelevant to money supply

Answer: (A)

Near money refers to financial assets that aren’t themselves a medium of exchange but can be quickly turned into cash or checks with little loss of value. These assets are highly liquid and low-risk, so households and firms hold them to preserve liquidity, knowing they can convert them into cash or demand deposits when needed. Examples include savings deposits, certain time deposits, money market mutual funds, and short-term government securities. Because of their ready convertibility to cash or checkable deposits, they function as near money and are included in broader money measures like M2. So, the statement is true: near money consists of assets not used directly for payments but easily convertible into cash or checkable deposits. The other options misstate the concept, since near money is indeed relevant to money supply and not limited to forecasting.

Near money refers to financial assets that aren’t themselves a medium of exchange but can be quickly turned into cash or checks with little loss of value. These assets are highly liquid and low-risk, so households and firms hold them to preserve liquidity, knowing they can convert them into cash or demand deposits when needed. Examples include savings deposits, certain time deposits, money market mutual funds, and short-term government securities. Because of their ready convertibility to cash or checkable deposits, they function as near money and are included in broader money measures like M2.

So, the statement is true: near money consists of assets not used directly for payments but easily convertible into cash or checkable deposits. The other options misstate the concept, since near money is indeed relevant to money supply and not limited to forecasting.