Credit Cards and Debit Cards in the Monetary System
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Questions and Answers

What is the primary distinction between credit cards and debit cards in relation to the monetary system?

  • Credit cards represent a form of money, while debit cards do not.
  • Credit cards are included in measures of the quantity of money, but debit cards are not.
  • Debit cards are a method of payment, while credit cards are a method of borrowing.
  • Debit cards allow immediate access to funds, while credit cards defer payment. (correct)

    • When using a credit card, which of the following best describes the flow of funds?

  • The transaction is recorded as a loan from the bank to you.
  • The merchant receives payment directly from your credit card balance.
  • The bank pays the merchant on your behalf, and you repay the bank later. (correct)
  • The bank transfers funds from your account to the merchant's account.

    • If you were to write a check to pay your credit card bill, what component of the monetary system would the check be drawn from?

  • The outstanding credit card debt.
  • The credit card balance itself.
  • The bank's reserves held at the central bank.
  • The balance in your checking account. (correct)

    • How are debit card transactions treated in the measurement of the quantity of money?

    <p>They are included, as debit cards represent immediate access to bank deposits.</p> Signup and view all the answers

    Why are credit cards not considered a form of money in the monetary system?

    <p>Credit cards represent a form of borrowing, not a medium of exchange.</p> Signup and view all the answers

    If a consumer uses a debit card to make a purchase, what happens to the money supply?

    <p>The money supply remains unchanged, as the funds are simply transferred.</p> Signup and view all the answers

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