Elisabeth gets a new credit card with a $ 5 comma 000 credit limit. Elisabeth gets a new credit card with a $5,000 credit limit. Is this counted in M1 only, M2 only, M1 and M2, or neither?

Question

Esperanza Gregory

Business

25 June, 23:35

Elisabeth gets a new credit card with a $ 5 comma 000 credit limit. Elisabeth gets a new credit card with a $5,000 credit limit. Is this counted in M1 only, M2 only, M1 and M2, or neither?

+2

Answers (1)

Know the Answer?

Emerson Mitchell · Answer 1

Neither M1 nor M2

Explanation:

The money supply can be defined as the stock of currency and other liquid instruments circulating in an economy at a particular time. It includes cash, coins, savings accounts, the balance held in checking accounts and other near money instruments.

These four definitions of money, M1, M2, M3, and M4. A credit card is not included in any of these. It is not considered as money. Holding a credit card does not change the money supply.

Instead of money, it is rather considered a short term loan. Money is a financial asset while credit card debts are liabilities. So they will not be included in M1 or M2.