What Is Meant by Liquidity

question 79

Multiple Choice

What is meant by liquidity?

• A) It is the ease with which an asset can be converted into cash.
• B) It is the quantity of cash that the government holds with the central bank.
• C) It is the amount of money banks require on a daily basis to meet their customers' needs.
• D) It refers to the supply of money in an economy.

---

Definitions:

Interest Rates

The percentage at which interest is charged or paid for the use of money, typically expressed as an annual percentage of the principal.

Corporate Taxes

Taxes imposed on the income or profit of corporations by the government.

After-tax Profits

The amount of money a company retains after all income taxes have been subtracted from its earnings.

Marginal Propensity

The ratio of the change in an economic variable (such as consumption or savings) in response to a change in another variable (such as income).