Liquidity is
A) the same thing as a checking deposit.
B) the net flow of gold into the U.S. Treasury.
C) the property of an asset being instantly convertible into a means of payment with little loss in value.
D) the degree of movement in an asset's interest rate.

Question

Quizplus · Accepted Answer

Liquidity refers to the ease with which an asset can be converted into cash or used as a means of payment without losing value. Therefore, option C - "the property of an asset being instantly convertible into a means of payment with little loss in value" is the correct definition of liquidity. Option A is incorrect as a checking deposit is a type of liquid asset but not the same thing as liquidity. Option B is incorrect as the net flow of gold into the U.S. Treasury is a measure of gold reserves, which is not directly related to liquidity. Option D is incorrect as the degree of movement in an asset's interest rate is a measure of interest rate risk, which is not directly related to liquidity.

Liquidity Is