ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Because savings accounts pay interest while keeping your funds easily accessible, they’re a good option for emergency or short-term cash. In exchange for the ease and liquidity that savings accounts offer, you’ll earn a lower rate than that paid by more restrictive savings instruments and investments.

Detailed explanation-2: -Definition: Liquidity means how quickly you can get your hands on your cash. In simpler terms, liquidity is to get your money whenever you need it. Description: Liquidity might be your emergency savings account or the cash lying with you that you can access in case of any unforeseen happening or any financial setback.

Detailed explanation-3: -The main reason to consider a savings account is the opportunity to earn interest. Think of the interest you earn on savings as a reward for keeping your money in the bank instead of spending it. If you’re looking for the best savings account interest rate, online banks are a good place to start.

Detailed explanation-4: -Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. The most liquid asset of all is cash itself. The more liquid an asset is, the easier and more efficient it is to turn it back into cash.

Detailed explanation-5: -Liquidity in finance by the book is how quickly any asset can be changed in to hard cash. Therefore, any account having only cash can be said as the most liquid. For instance, a checking or a saving account could be considered the most liquid accounts.