Liquidity is the
A) same as the velocity of money.
B) inverse of the velocity of money.
C) speed with which the price of an asset changes as its intrinsic value changes.
D) ease with which an asset can be converted into money.

Question

Quizplus · Accepted Answer

Liquidity refers to the ease with which an asset can be converted into cash without affecting the price of the asset in the market. Therefore, the best choice is D. Liquidity is not the same as the velocity of money (A) or the inverse of the velocity of money (B). Liquidity is also not related to the speed with which the price of an asset changes as its intrinsic value changes (C).

Liquidity Is the