Close to the money refers to highly liquid assets that can be quickly converted to cash with little or no loss of value. Examples include government securities and monetary funds, while company stock is not classified as close money. Close money can have a significant effect on an economy, as it can easily increase the money supply and encourage spending.
Close to the money is a term used to refer to highly liquid assets. These are non-cash assets that can be quickly converted to cash with little or no loss of value. They are also often referred to as quasi-money. Nearby money can sometimes be taken into account when assessing a country’s money supply which can play a role in the health of its economy.
Exactly which assets are classified as close money varies depending on who is using the term. This is because what counts as “close” depends on how much margin is allowed for delays or the costs of turning an asset into cash. Arguably the only asset that can be converted without time or cost penalties is money in an instant access bank account. Foreign currency holdings follow closely, as it is usually possible to convert them to domestic currency almost instantly, although there will usually be a transaction fee.
Assets that are almost always classified as close money include government or treasury securities, such as bills; This is because they are very reliable and are almost guaranteed to find a buyer. Monetary funds are another example, since although they are based on debt securities, they are designed to be highly liquid. Money deposited in a fixed-term bank can also be counted, although this may be restricted to deposits that are on set terms to end imminently. In different countries, these deposits are known as certificates of deposit, bonds, time deposits, and time deposits.
Other types of assets that are liquid in practical terms are not classified as close money. The most common example of this is company stock. Although most shares can be converted to cash without much trouble in reality, this is not guaranteed as shares may go through periods when there are few potential buyers. It is also difficult to assign a long-term value to a stock, since its price can fluctuate over time. This is in contrast to most types of close money, where the value is fixed or does not vary significantly.
Close money can have a significant effect on an economy, second only to extra money. This is partly because it can be easily converted to cash, increasing the money supply. Another reason is that savings that are held in a highly liquid form are much more likely to be spent than those that are subject to long-term savings that cannot be accessed without delay or penalty.
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