Liquidity describes how easily an item can be traded for another item, or into the common currency within an economy. Money is the most liquid asset because it is universally recognized and accepted as the common currency. In this way, money gives consumers the freedom to trade goods and services easily without having to barter.
Liquid financial instruments are tradable easily and have transaction costs are low. There should be no or minimal spread between the prices to buy and sell the instrument being used as money.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment