Question

In recent years debit cards have become popular. Debit cards allow the holder of the card to pay a merchant for gods and services directly from a checking account. How do you think the introduction of debit cards affected the amount of currency in the economy? How about the amount of checking account deposits.

Answer 1

Answer:

Debit cards are assigned to checking accounts, and since they have become more popular, the amount of currency in the economy has decreased while the amount of checking account deposits has increased.

Explanation:

Actual currency (bills and coins) and checking accounts are part of the M1 category of the money supply, since both are considered completely liquid.