Credit cards are not considered money but they do affect the amount of M1 and M2 monetary aggregates. This is because credit cards can be used to make payments, but the actual payment is made at a later time (when the credit card bill is paid). Therefore, credit cards do not directly affect the amount of money in circulation but they do influence the velocity of money.

Solved

Credit Cards

Question 55

Multiple Choice

Credit cards

A) are considered money because they are a means of payment
B) are not considered money and thus are not of importance to the monetary authority
C) are not considered money but are important because they may affect how much people hold in M1 and M2
D) are counted in the money supply as part of M3
E) are considered money when held by the public

Correct Answer: