Question

Liquidity refers to?

A.the ease with which an asset is converted to the medium of exchange.
B.the measurement of the intrinsic value of commodity money.
C.the measurement of the durability of a good.
D.how many times a dollar circulates in a given year.

Answer 1

Liquidity is the ease with which a financial asset can be used to purchase goods or services, with cash being a highly liquid asset compared to funds in a savings account. The correct answer is option A.

Step-by-step explanation:

Liquidity refers to how quickly you can use a financial asset to buy a good or service. For instance, cash is considered highly liquid because you can directly use it for transactions, like buying a hamburger. In contrast, the money in your savings account is less liquid as it requires additional steps, such as visiting a bank or using an ATM, to access the funds.