MONEY, MONEY, MONEY

ECO220 Module 4 - Case Name: Affiliation: Course: Instructor: Date: ECO220 Module 4 - Case Introduction Money is vital in the economy as it acts as a media of exchange, store of value, and unit of account, fostering economic growth. It is necessary to define money to determine how financial systems operate, specifically regarding the Fed's activities targeting monetary control to maintain stability. Policies implemented by the Fed influence the schedule of money and credit, as well as preconditions that define inflation, unemployment, GDP, and others. Also, the economic implications of money held for saving or withheld from circulation further make the concept of monetary velocity central to the support of economic activities. Some aspects relating to money and monetary policy include credit and debit cards as money, the tools of the Fed used to expand the money supply, and checking the accuracy of a statement that an open-market purchase was made. Are Credit Cards or Debit Cards Money? Money is a significant element of any economy, providing three key functions: as a unit of account, medium of exchange, and store of value. When used as a medium of exchange, money promotes the exchange of goods and services without the drawback of barter trade. It is a measure of value that allows businesses and consumers to make economically informed decisions on the value of products and services (CFI Team, 2022b). Money is a form of value and stock-piling of future value as it retains its value in the foreseeable future. Credit cards, however, do not meet any of these criteria. Although they provide a platform for trading as a means of exchange, they are a credit instrument, not actual cash. The purchases conducted using credit cards are cleared through money (such as dollars or any other legal tender). Thus, they do not have any face value (HSBC UK, n.d.). Therefore, credit cards also do not function as a unit of account, as they merely give the holder access to borrowed cash and cannot store value as they represent an obligation to pay instead of value. Instead of credit cards, debit cards are directly linked to a person's account and, therefore, to real cash. Debit cards offer the convenience of easing transactions through which consumers make payments using plastic cards rather than money, and the transaction is charged to the specific account. This process makes debit cards closer to the actual usage of cash than credit cards (HSBC UK, n.d.). However, they still need money themselves. The unit of account is the original currency, for example, dollars or Euros, as the debit card offers no reference point or measure of economic value. Furthermore, debit cards provide access to funds, which is a medium of exchange, but it is the value of the account balance within the card. Unlike credit cards, debit cards have no face value but are a medium to access stored value. In other words, debit cards merely facilitate the use of money and, therefore, cannot be termed money on their own as they lack all three functions. Therefore, credit and debit cards are instruments for obtaining or being granted funds for performing transactions, purposes, and making things more convenient, but these do not qualify a...