Liquidity refers to
A)the relation between the price and interest rate of an asset.
B)the risk of an asset relative to its selling price.
C)the ease with which an asset is converted into a medium of exchange.
D)the sensitivity of investment spending to changes in the interest rate.

Question

Quizplus · Accepted Answer

Liquidity is the degree to which an asset can be easily bought or sold in the market without affecting its price. It refers to the ease with which an asset can be converted into cash or a medium of exchange. Therefore, option C is the correct choice as it defines liquidity accurately. Option A refers to the relationship between an asset's price and interest rate, while option B defines an asset's risk relative to its selling price. Option D refers to the responsiveness of investment spending to changes in the interest rate. None of these options accurately represents the meaning of liquidity.

Liquidity Refers to