Credit cards play a multifaceted role in the financial system, contributing to various aspects such as medium of exchange, money supply measures (M1 and M2), and the broader analysis of the monetary system.
Firstly, credit cards serve as a medium of exchange, allowing individuals to make transactions without the need for physical currency. This function aligns with option (a), as credit cards facilitate the exchange of goods and services, promoting economic activity by providing a convenient and widely accepted means of payment.
In terms of money supply measures, credit cards are included in M2 but not in M1, supporting option (b). M1 includes the most liquid forms of money, such as currency and demand deposits, while M2 incorporates M1 plus less liquid assets like savings accounts and time deposits. Credit cards are excluded from M1 because they represent a form of credit rather than immediate, liquid funds. However, they are considered part of M2 as they provide a potential source of funds for spending.
Furthermore, credit cards are crucial for analyzing the monetary system, supporting option (c). The usage patterns of credit cards can provide insights into consumer spending habits, economic trends, and the overall health of the financial system. Monitoring credit card transactions and debt levels is essential for policymakers and economists to assess the stability and functioning of the monetary system.
In conclusion, option (d) is correct as credit cards serve as a medium of exchange, are part of M2 but not M1, and are significant for analyzing the monetary system in its broader context.