Liquidity is
A)the ease with which an asset can be converted into cash.
B)desirable, but reduces the value of assets held to smooth spending.
C)desirable, but reduces the value of assets held for precautionary purposes.
D)greater for common stock than for checkable deposits in commercial banks.

Question

Quizplus · Accepted Answer

Liquidity refers to the ease with which an asset can be converted into cash. Thus, option A is the correct answer. Option B and C provide contradictory statements as they claim liquidity is desirable but reduces the value of assets held for different purposes. Option D is not a correct statement as checkable deposits in commercial banks are considered highly liquid.

Liquidity Is