Liquidity is:
A) a measure of how easily a particular asset can quickly be converted to cash without much loss of value.
B) the speed with which dollars are spent in the economy.
C) the speed with which physical dollars change hands in the economy.
D) the magnitude of change in the money supply as controlled by the Fed.

Question

Quizplus · Accepted Answer

Liquidity refers to how quickly and easily an asset can be converted into cash without losing value. Option A is the only choice that accurately describes this definition. Option B is a measure of the economy's velocity of money, while option C describes the speed of physical currency exchanges. Option D refers to the Fed's control over the money supply, which is not directly related to liquidity.

Liquidity Is