Final answer:
The statement that the key to classifying an amount as cash is its readiness to pay debts is true. Cash's liquidity is its defining characteristic, making it immediately available for transactions, unlike checks or funds in savings accounts.
Step-by-step explanation:
The key to the classification of an amount as cash is indeed that it be readily available to pay debts. This statement is true. Cash is considered the most liquid asset and encompasses currency that can be used immediately without any need for conversion. On the contrary, checks need to be cashed and funds from credit cards need to be advanced, which may not be as immediate as using cash. Additionally, funds stored in savings accounts are not as liquid as those in checking accounts because you usually need to go to an ATM or bank to access them.
Banks provide a critical service by allowing people and businesses to store money in checking or savings accounts, enabling efficient economic transactions without the constant need to carry large amounts of cash. The liquidity of different financial assets is a fundamental concept in economics, affecting how money functions in an economy and how easily individuals and businesses can engage in transactions.