Economists define liquidity as
A)the difference between the return on the asset and the return on a long-term U.S. Treasury bond.
B)the fraction the asset makes up of an investor's portfolio.
C)the ease with which an asset can be exchanged for other assets or for goods and services.
D)the difference between the total demand for an asset and the total supply of the asset.

Question

Quizplus · Accepted Answer

Economists define liquidity as the ease with which an asset can be exchanged for other assets or for goods and services. Option A refers to the concept of return on investment, while option B pertains to portfolio diversification. Option D describes the market forces of supply and demand, which do impact liquidity but are not necessarily synonymous with it.

Economists Define Liquidity as