Can You Explain The Concept Of Near Money?

Question

Can You Explain The Concept Of Near Money?

3 Answers

Answer Question

Answer 1

The money and assets which can be easily and quickly transferred into money without loss in value are called near money.Near money cannot be directly used or making payments.There are first to converted into proper money as and when needed for spending.Near money or non monetary liquid assets chiefly consist of time deposit,treasury bills,government securities,saving bonds.

As near monies can be easily converted into currency or demand deposits.It has important bearing on the economic health of the economy.The increase or decrease in the holding of near money affects the rate of communities saving and spending.The greater amount of wealth in form of near monies,the greater is tendency of the community to consume out of income.Secondly,as the monies can be easily converted into cash.It directly effects the money supply.

Answer 2

Near money are liquid assets that are nearly substitutes for money. Sometimes they are called as quasi money. They are easily convertible to liquid money with or without any loss and they perform the medium of exchange function of money. Treasury bill, bill of exchange, bonds, securities, debentures, insurance policies, time deposit, checks and drafts etc. Are the example of near money. However, they are near money because all these assets have market value and are negotiable so that they can be converted into real money within a short period without any loss.
For example, a time deposit of dollar 10,000 for three years can always be converted into demand deposit or dollar 10,000 in cash at anytime before the completion of three years. They also fetch a fixed rate of interest, which may be reduced if the deposit is converted before the expiry of fixed period.
As near money must be converted onto cash, they directly affect the supply of money in the economy and it is an indicator of the volume of savings and consuming amount from income.

Answer 3

All the assets which can be easily and quickly converted into money without loss are called near money. Near money or non monetary liquid assets chiefly consist of the debts of financial institutions and of the federal government. Near money or money substitutes include time and saving deposits of commercial bank, saving deposits in mutual saving banks, saving loans association share, claims against credit union, treasury bills, bill of exchange, and short term debts of safe private debtors. Near money though it possesses high degree of money or liquidity, yet it is not generally acceptable as a medium of exchange. It is not legally payable on demand as well. It can, however, be readily converted into money as and when needed at a very little cost.

As near monies can be readily converted into currency or demand deposits, therefore it has important bearing on the health of the economy. The increase or decrease in the holding of near monies affects the rate of community's saving and spending. The greater the amount of wealth in the form of near monies, the greater is the tendency to consume out of this income. Secondly, as the near monies can be easily converted into cash, therefore it directly affects the money supply.