Question

Are outstanding credit card balances counted as part of the money supply?

a. yes; they are used to purchase things, and therefore, they are included in the money supply figures.
b. partly; credit card balances are included in the m1 money supply, but not the m2 money supply.
c. no; money is an asset, while the credit card balances are a liability. thus, they are not included in the money supply figures.
d. partly; credit card balances of $100 or less are included in the m1 money supply, but the money supply figures do not include balances in excess of $100.

Answer 1

Credit card balances are not counted as part of the money supply, because credit card balances reflect funds that have been borrowed. Unlike money, they cannot be used as a means of payment. The M1 supply contains coins, paper currency, demand deposits, other checkable deposits, and traveler's checks. So, outstanding balances on credit cards is not a component of the M1 money supply.