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Difficulty: MediumTypes and Forms of Money

An investor holds assets such as Treasury bills and fixed deposit receipts that are highly liquid and easily convertible into cash, but cannot be directly tendered to purchase goods in a retail transaction. Which form of money is exemplified by these assets?

  1. Quasi-moneyAnswer
  2. B
    Token money
  3. C
    Legal tender
  4. D
    Commodity money

Answer

The correct answer is Quasi-money.
Quasi-money consists of highly liquid financial assets like Treasury bills, money market fund shares, and savings accounts that can be readily turned into cash but cannot be transferred directly to settle daily retail trades.

Step-by-Step Solution

1
Analyze the properties of the financial instruments described
Treasury bills and fixed deposit receipts have high liquidity and fixed monetary value, but lack direct transactional acceptance in retail markets.
Identifying whether an instrument is a direct medium of exchange or a near-cash asset determines its classification.
2
Match these characteristics to the taxonomy of monetary forms
Assets that perform the store of value function of money and are easily converted to cash, yet do not serve directly as a medium of exchange, are categorized as quasi-money (near-money).
This distinguishes liquid investments from legal tender and bank demand deposits.

Key Concept

Quasi-money (Near-money)
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Topics

Types and Forms of Money

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