ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Money is the most liquid asset because it is universally recognized and accepted as a common currency. In this way, money gives consumers the freedom to trade goods and services easily without having to barter. Liquid financial instruments are easily tradable and have low transaction costs.

Detailed explanation-2: -Share. Liquidity definition. Liquidity is a company’s ability to convert assets to cash or acquire cash-through a loan or money in the bank-to pay its short-term obligations or liabilities. How much cash could your business access if you had to pay off what you owe today-and how fast could you get it?

Detailed explanation-3: -Liquidity refers to how simply an asset can be converted into money. Liquidity is one of the key advantages of money, and it can’t be considered a function of money.

Detailed explanation-4: -Money Supply Measure “M1” M1 consists of the most highly liquid assets. That is, M1 includes all forms of assets that are easily exchangeable as payment for goods and services. It consists of coin and currency in circulation, traveler’s checks, demand deposits, and other checkable deposits.

Detailed explanation-5: -While the term money simply refers to the supply of money, the term liquidity relates to the interplay between the supply of and the demand for money. People demand money primarily in order to facilitate trade. By means of money, a product of one specialist is exchanged for the product of another specialist.