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What are reasons that checkable deposits are considered to be a component of M1?

Multiple select question.

A checkable deposit can be transferred directly to another party by means of a credit card payment.

A checkable deposit can be converted into paper money and coins on demand.

A checkable deposit can transfered simply to another party by means of a check or debit card payment.

A checkable deposit can be converted into spendable electronic cash almost instantaneously by a cash-transfer system, such Venmo or PayPal.

1 answer

Checkable deposits are considered a component of M1 because they can be readily used as money for transactions. The correct reasons would be:

  • A checkable deposit can be converted into paper money and coins on demand.

  • A checkable deposit can be transferred simply to another party by means of a check or debit card payment.

  • A checkable deposit can be converted into spendable electronic cash almost instantaneously by a cash-transfer system, such as Venmo or PayPal.

The statement regarding credit card payments is incorrect because credit card transactions involve borrowing rather than direct use of funds from a deposit.