ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which one of the following items would be the most liquid (able to be used in an exchange immediately)?
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Pizza
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Ticket to next week’s basketball game
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Stereo
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Dollar bill
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Explanation:
Detailed explanation-1: -Cash is the most liquid asset possible as it is already in the form of money.
Detailed explanation-2: -Cash on hand is the most liquid type of asset, followed by funds you can withdraw from your bank accounts.
Detailed explanation-3: -Cash is considered the most liquid asset because it’s readily available to use. Cash can be paper money, coins, or checking or savings account balances.
Detailed explanation-4: -M1 includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash. However, “near money” and “near, near money, ” which fall under M2 and M3, cannot be converted to currency as quickly.
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