What is the difference between Money and Near-Money?



Near-money can be distinguished from money on the following grounds:

1. Definition:

Money consists of coins, currency notes and demand deposits of the banks. Near-money, on the other hand, includes the financial assets, like time-deposits, bills of exchange, bond, shares, etc.

2. Liquidity:

Money possesses 100 per cent liquidity; i.e., it is perfectly liquid or can be readily acceptable as a means of payment. Near-money lacks 100 per cent liquidity, i.e., it involves time cost for its conversion into money.

3. Function:

Money serves as a unit of account or a common measure of value. All prices are expressed in terms of money. Near-money on the other hand, does not perform such functions. Rather, its own value is expressed in terms of money.

4. Use in Transactions:

Money is directly used for making transactions. Near-money, on the other hand, is an indirect medium of exchange; it has to be first converted into ready money and then used for transactions.

5. Income-Yielding Quality:

Money is not an income-yielding asset. On the contrary, near-money assets are income yielding assets.