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Are debit card balances part of money supply M1? Explain. What about store gift-cards – are...

Are debit card balances part of money supply M1? Explain. What about store gift-cards – are they part of M1? Explain.

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Answer #1

Debit card is a part of money supply M1 because it can be used in a similar way like the checkable deposits where a check is used to withdraw money. Debit card also works in a similar way and there is no credit involved.

Store gift card are not money supply M1 because they do not deposit or withdraw money from the deposits accumulated in the bank. Store gift card cannot deposit the cash balance back into the bank account which indicates that it is not money.

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