Q.Write a short note on: Near money

Near money refers to liquid financial assets that can be readily converted into cash but are not themselves used directly as money.

Explanation

Near money means those assets which are close substitutes for money because they can be converted into cash quickly and with little or no loss of value, yet they do not serve directly as a medium of exchange. Examples include bills of exchange, government bonds, treasury bills, fixed and time deposits, and shares and debentures. Such assets possess a high degree of liquidity (nearness to money), which is why they are called near money. They are important because people hold wealth in these forms to earn income while keeping …

Liquidity is the degree to which an asset can be converted into cash quickly and without loss of value; money is the most liquid asset.

Explanation

Liquidity refers to the quality of an asset of being easily and quickly convertible into cash without any loss of its value. Money (cash) possesses perfect liquidity because it is itself a ready and generally accepted means of payment. Other assets differ in their liquidity: a savings deposit or a treasury bill is highly liquid, while assets like land or buildings are much less liquid because they take time to sell and may be sold at a loss. People prefer to hold a part of their wealth in liquid for …

Liquidity is the quality of an asset of being easily and quickly convertible into cash without loss of value. Money (cash) is perfectly liquid; near-money assets like bank deposits are highly liquid; and assets like land and buildings are the least liquid.

Meaning

Liquidity refers to the degree to which an asset can be converted into cash quickly and without loss of value. An asset is said to be liquid if it can be turned into money easily, speedily and at its full worth.

Explanation

Assets differ in their degree of liquidity:

• Cash (currency and coins) is the most liquid asset, because it is money itself and is accepted everywhere immediately.
• Demand deposits and savings deposits in banks are highly liquid, as they can be withdrawn quickly; they are called near money.
• Shares, bonds and fixed deposits are less liquid, because converting them into cash takes some time and may involve a cost.
• Land, buildings and machinery are the least liquid assets, since selling them takes a long time and may involve loss. …

Near money consists of highly liquid financial assets that are not legal money but can be readily converted into cash with little loss of value, such as time deposits, savings deposits, bills of exchange and bonds. They serve as a store of value but are not directly a medium of exchange.

Meaning

Near money refers to assets which are close substitutes for money because they are highly liquid, that is, they can be converted into cash quickly and with little or no loss of value. However, they are not money in the strict sense, because they cannot be directly used as a medium of exchange to make payments.

Examples and features

Common examples of near money include:

• time (fixed) deposits and savings deposits with banks,
• bills of exchange,
• government bonds and securities, and
• treasury bills.

The features of near money are:

• it is highly liquid, though slightly less liquid than cash;
• it performs the store-of-value function of money well;
• it earns some income, such as interest, unlike cash; but …

Currency is the stock of paper notes and coins issued by the central bank and the government which serves as legal tender and circulates as cash in the economy. It forms the currency component of the money supply held by the public.

Meaning

Currency is money in the form of paper notes and metallic coins that is in actual circulation in a country. In India, currency notes are issued by the Reserve Bank of India and coins and one-rupee notes are issued by the Government of India.

• Currency is legal tender, which means it must be accepted in payment of debts and dues.
• It is the most liquid form of money and is used by people for day-to-day transactions. …

Near money means financial assets that are not money themselves but are highly liquid and can be converted into money quickly and with little loss of value, such as bonds, bills of exchange, treasury bills and time deposits.

Meaning

Near money refers to assets that are close substitutes for money — they are not money in the strict sense (they cannot be used directly as a medium of exchange), but they are highly liquid and can be easily and quickly converted into cash with little or no loss of value.

…

Currency means the paper notes and metallic coins in circulation that act as legal tender money in a country. In India it comprises the currency notes issued by the RBI and the coins and one-rupee notes issued by the Government, and it forms a major part of the money supply.

Meaning

Currency refers to the paper notes and metallic coins that are in actual circulation in a country and are accepted as money for all transactions. It is the physical form of money that people carry and use in day-to-day dealings.

Currency is legal tender, which means that by law it must be accepted in payment of debts and obligations. In India:

• currency notes (except the one-rupee note) are issued by the Reserve Bank of India, while
• coins and the one-rupee note are issued by the Government of India. …