Case Assignment Discussion Paper
Trident University International ECO 202
Business/Economics Discussion Questions
Are credit cards or debit cards money? Explain your answer.
In explaining this, it is necessary to understand what money means. Money is a
medium of exchange that one uses to purchase goods and services or that one can
hold as a store of value. Depending on how liquid money is, three broad classes of
money are M1, M2, and M3. M1 refers to currency in the hands of the public including
demand deposits, travelers’ checks that can be checks in writing (Lumen Learning, n.d).
Besides, M2 includes M1, time deposits of fewer than hundred thousand dollars, savings
account, and balances in retail money market mutual funds. In addition, M 3 includes M2,
large denomination of money up to more than a hundred thousand dollars time
deposits, Eurodollars at the hands of US residents at foreign branches of US banks,
and all banks in United Kingdom and Canada, balances in institutional money funds and
repurchase liabilities.
Debit card operates like a check because it involves an instruction to the user’s
bank to transfer a specific amount of money directly from their bank account to the
seller. Furthermore, debit card is more of a paper check rather than a checkable deposit
thus it is not part of money supply. On the other hand, credit card is an equivalent of a
short-term loan that involves transfer of money by the credit card company from its
checking account to the seller once the cardholder makes a purchase with the credit
card (Lumen Learning, n.d). The credit card company then sends the credit card bill for
