Question

Are all forms of money in an economy tangible or not and why?

Answer 1

No; tangibility is not central to the definition of money, and money creation relies on some intangibility.

Explanation:

I posted definitions of M1 and M2 in response to a different question, which is partially related to this. It might be helpful to review those definitions, elsewhere. However, "forms" of money do not align exactly with those definitions, and I'm not exactly sure how to interpret the word "forms".

I will point out, though, that we can distinguish between actual currency (printed bills and minted coins) and all other forms of money included in M1, M2 and even M3. Carrying around cash (bills and coins) clearly has some aspect of tangibility. If I want something from you, we can probably agree on a cash price, and if I have that amount of cash with me, I can exchange the cash for perhaps a slice of pizza (something also obviously tangible).

I might persuade you to part with your slice of pizza by writing you a check, but you can see that this example involves less tangible money. You might or might not believe that my check is drawn on a real bank (so you could inspect the check, note that it appears to use Magnetic Ink Character Recognition, etc.). Even if you believe the check is real, you need to believe that I have sufficient funds in my account to clear the check when you present it to your bank. But are those funds tangible? In my view, no. They are an accounting entry in my bank's information systems.

Are the funds in my bank a complete figment of imagination? Again in my view, no. They represent a claim against the bank, and they are "real" to the extent that the banking system functions according to rules agreed upon in general and enforced by our government. Those rules require that banks keep a certain amount of deposits in reserve, so that it can provide actual cash to depositors who come to the bank and demand their money. (Checking accounts are called "demand deposit accounts"; now you can see why.)

In summary, lots of money moves around electronically and via checks, and these forms are not as tangible as currency and coins, in my view.