What is liquidity? Why is money the most liquid of all assets? ...

[SO00]

What is liquidity? Why is money the most liquid of all assets? What is the cost of this liquidity?
 
  What will be an ideal response?

Question 2

Refer to the table above. If imports falls to 45,000 in the next year, ________, all other variables remaining unchanged.
 
  A) gross domestic product will fall by 5,000 B) gross domestic product will fall by  10,000
  C) gross domestic product will increase by 5,000 D) gross domestic product will increase by  10,000

[whitcassie]

Answer to Question 1

Liquidity is the degree to which an asset can be acquired or disposed of without much danger of any loss in nominal value and with small transaction costs. Money is the most widely and readily accepted asset that can be exchanged for other goods and services, so it is the most liquid asset. The cost of this liquidity is the interest yield given up that was available by holding another asset.

Answer to Question 2

C

[SO00]

Correct answers!

[whitcassie]

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