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Liquidity

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PPGPortal > Home > Concept Dictionary > K, L, M > Liquidity
 

Liquidity 

The ease with which an asset can be converted into the economy's medium of exchange.

(Mankiw, N. Gregory, Ronald Kneebone, Kenneth J. McKenzie and Nicholas Rowe. 2008. Principles of Macroeconomics, 4th Canadian ed. Toronto: Thomson Nelson, p. 218.)

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Money is the most liquid asset in the economy since it is the economy's medium of exchange. Stock and bonds are relatively liquid assets because they can be sold easily with a small cost. By contrast, however, selling a house or a painting requires more time and effort, thus these assets are less liquid.

     

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