Which statement best defines liquidity?
A) It is the ease with which an asset is converted to the medium of exchange.
B) It is a measurement of the intrinsic value of commodity money.
C) It is the ability of an asset to retain purchasing power.
D) It refers to how many times a dollar changes hands in a given year.

Question

Quizplus · Accepted Answer

Liquidity refers to the ease with which an asset can be converted to the medium of exchange, such as cash or other liquid assets. In other words, it is the ability to quickly and easily sell an asset for cash without affecting its price significantly. The more liquid an asset is, the easier and faster it is to convert it into cash.

Which Statement Best Defines Liquidity