Posted in Finance, Accounting and Economics Terms, Total Reads: 680
Definition: Near Money
Near money is a term used in economics to describe the non-cash items or assets which are highly liquid and hence can be quickly converted to cash. Near money can also be defined as those assets which themselves are not medium of exchange but can be readily exchanged or converted into some medium of exchange. Also, it can be defined as those assets which can easily be converted into cash with almost no loss in its value in terms of money with time. This near money is also referred as ‘Quasi Money’.
Examples of near money include various money market instruments such as government securities or Treasury Bills or Certificate of Deposits etc. Whenever economists or statisticians estimate the money supply or flow of money in the economy then these near money assets may or may not be considered depending upon its form or type. Frequently traded foreign currencies such as dollars, euro, yen, franc etc. and various short term bonds may also be considered as near money. Banks savings account from where money can be withdrawn immediately and without any penalty is also a form of near money.
However, there are some forms of near money in which although money can be obtained immediately but they attract some kind of penalty. For example: taking the money from the insurance policy before its maturity attracts various forms of penalties as well as taxes. Similarly, amount invested in stock market or in shares can also be classified under near money since the money can be obtained immediately by the investors by selling the shares.