Question

Explain the following contingent function of money:

Basis of credit system

Answer 1

1. Credit holds significant importance in today’s financial system. In reality, commercial and business operations rely heavily on a country's credit framework.
2. The foundation of this entire credit system is money. Without money, essential credit tools such as cheques, bills of exchange, and others cannot function, as they represent claims on money.
3. Thus, money forms the backbone of all credit-related activities.