Question

An asset with great liquidity is one that

A. generates high transactions costs when liquidating.
B. is an excellent store of value.
C. acts as a unit of account.
D. can be converted into a medium of exchange with relative ease and speed.

Answer 1

D

Step-by-step explanation:

Liquidity is an asset quality. It refers to the speed at which an asset can be sold or bought in a market. An asset is more liquid if it can be sold or bought at a quick speed, for intance, it does not generate high transaction costs. The most liquid asset example is cash. Eventhough, cash is a unit of account, there are other liquid assets that does not share this caracteristic such as shares.

A great liquidity does not represent in all cases assets that are excellent store of value. There are iliquid assets such as houses that are good store of value.