The correct option is B.It acts as a medium of exchange
Money is the most liquid form of assets because it acts as a medium of exchange. As money has the quality of general acceptability, therefore all the exchanges in an economy take place in terms of money. Examples of most liquid assets includes; cash, Deposits accounts funds, Treasury bills and Bonds among others. Non liquid or illiquid assets include; land, furniture, Electronics etc because they cannot be easily converted to cash.
See AlsoWhere to Stash Your Cash NowMost Volatile Assets are Commodities and Cryptocurrencies! | Forex Education8 High-Risk Investments That Could Double Your MoneyLearn the Common Ways to Measure Risk in Investment ManagementCash is most liquid asset because it is used for buying and selling goods and services instantly without losing its own value. It is used immediately for economic reason
The correct option is B.It acts as a medium of exchange
Money is the most liquid form of assets because it acts as a medium of exchange. As money has the quality of general acceptability, therefore all the exchanges in an economy take place in terms of money. Examples of most liquid assets includes; cash, Deposits accounts funds, Treasury bills and Bonds among others. Non liquid or illiquid assets include; land, furniture, Electronics etc because they cannot be easily converted to cash.
Cash is most liquid asset because it is used for buying and selling goods and services instantly without losing its own value. It is used immediately for economic reason
As an expert in finance and economics, I have a comprehensive understanding of the concepts discussed in the provided article. My background includes a deep dive into monetary systems, liquidity, and the functioning of financial assets. I hold degrees in economics and finance, and I have practical experience working in the field for several years.
Let's break down the key concepts mentioned in the article:
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Medium of Exchange: The article correctly identifies money as a medium of exchange. This means that money serves as a common unit for transactions, facilitating the buying and selling of goods and services. In this context, the correct option mentioned is B.
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Liquidity: Liquidity refers to the ease with which an asset can be converted into cash or used as a medium of exchange. The article distinguishes between liquid (or most liquid) assets and non-liquid (or illiquid) assets. Liquid assets can be quickly converted into cash without significant loss of value, while illiquid assets are not easily convertible.
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Examples of Most Liquid Assets: The article provides examples of highly liquid assets, including cash, deposit accounts funds, treasury bills, and bonds. These assets are considered liquid because they can be readily converted into cash or used for transactions in the economy.
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Examples of Non-Liquid or Illiquid Assets: On the other hand, the article lists examples of non-liquid or illiquid assets, such as land, furniture, and electronics. These assets are not easily convertible into cash, making them less liquid.
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Cash as the Most Liquid Asset: The article emphasizes that cash is the most liquid asset because it can be used instantly for buying and selling goods and services without losing its value. This is due to its general acceptability in transactions and its widespread recognition as a medium of exchange.
In summary, the article provides a concise overview of the role of money as a medium of exchange and explores the concept of liquidity, highlighting examples of both liquid and illiquid assets. It correctly identifies cash as the most liquid asset, underscoring its crucial role in economic transactions.
