Near Money

calender iconUpdated on October 27, 2023
economics
economy

Near money is a type of money that is easily convertible into cash or other forms of money. It includes:

1. Travelers checks: Cheques drawn on a bank in a different country.

2. Foreign exchange: Coins and banknotes of other countries.

3. Money orders: Orders to pay a specific amount of money to a particular recipient.

4. Treasury bills: Government securities that are sold in small denominations and have a maturity of less than one year.

5. Deposits: Amounts of money deposited in a bank account.

6. Money market funds: Funds that invest in low-risk, short-term debt securities.

Characteristics of near money:

  • High liquidity: Easy to convert into cash or other forms of money quickly.
  • Low maturity: Have a maturity of less than one year.
  • Low risk: Generally considered to be relatively safe investments.
  • Interest rate sensitivity: Sensitive to changes in short-term interest rates.

Uses of near money:

  • Emergency savings: Money that is saved for unforeseen expenses.
  • Short-term investments: Investment in money market funds or Treasury bills.
  • Payments: Used to make payments for goods and services.
  • Cash: Can be used for cash transactions or as a source of credit.

FAQ's

What is meant by near money?

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Near money refers to financial assets that can easily be converted into cash but are not directly usable as a medium of exchange. Examples include savings accounts, treasury bills, bonds, and certificates of deposit.

What is a near money example?

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Why are bonds called near money?

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What is the concept of near money?

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What is the difference between near money and cash?

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