Question

Difference between money and near money

Answer 1

Answer:

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1. Liquidity:

Money possesses 100 per cent liquidity; i.e., it is perfectly liquid or can be readily acceptable as a means of payment. Near-money lacks 100 per cent liquidity, i.e., it involves time cost for its conversion into money.

2. Function:

Money serves as a unit of account or a common measure of value. All prices are expressed in terms of money. Near-money on the other hand, does not perform such functions. Rather, its own value is expressed in terms of money.

3. Use in Transactions:

Money is directly used for making transactions. Near-money, on the other hand, is an indirect medium of exchange; it has to be first converted into ready money and then used for transactions.

4. Income-Yielding Quality:

Money is not an income-yielding asset. On the contrary, near-money assets are income yielding assets.

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