Question

You purchase a good by writing a check for $1,000. Considering the financial payments system this check follows, when is the check money? Explain.

Answer 1

When we write a cheque then it is paper money. When the cheque is finally encashed then it becomes money, otherwise it is paper money.

When the bank will clear the cheque, which is possible only when there is sufficient funds in the bank account of the perosn who has written the cheque. Then after the final clearance of the cheque, the cheque finally becomes money, If by any chance it is dishonoured, then it will never become money, Dishonoring of cheque is due to a number of reasons like signature mismatch or lack of sufficient funds in the acount.

answered by: anonymous