Final answer:
Plastic money such as debit cards, credit cards, and smart cards facilitate financial transactions by representing real money, short-term loans, or storing digital cash for purchases, respectively. However, more cards do not equate to more actual money in the economy.
Step-by-step explanation:
Understanding Plastic Money: Debit Cards, Credit Cards, and Smart Cards
When discussing plastic money, such as debit cards, credit cards, and smart cards, it's important to understand their roles in financial transactions. A debit card acts as a direct instruction to transfer funds from the user's bank account to the seller, representing checkable deposits, which are considered real money. Credit cards, on the other hand, represent a short-term loan from the credit card company to the purchaser, which is not money until the cardholder settles the bill. Lastly, smart cards allow for the storage of digital cash that can be spent at various retailers, although some may have limited use, such as for specific services or locations. The presence of more plastic money options does not alter the actual quantity of money within the economy.
It is crucial to understand that the strip on the back of these cards uses electromagnetic induction to store and transfer information, which is critical in the functioning of these cards, but the physical card itself isn't the value, but rather the information it carries.