Liquidity Refers to

question 74

Multiple Choice

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.

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Definitions:

Efficiency Loss

The loss of economic efficiency that can occur when the balance between supply and demand is not achieved or when market conditions lead to a misallocation of resources.

Marginal Benefit

The additional satisfaction or utility gained by consuming or producing one more unit of a good or service.

Marginal Cost

The increase in cost that results from producing one additional unit of a good or service.

Efficiency Loss

The loss of potential economic welfare when resources are not optimally allocated, leading to outcomes where potential benefits exceed costs.