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Study with Quizlet and memorize flashcards containing terms like What is liquidity? Why is money the most liquid of all assets? What is the cost of this liquidity?, An asset that can be easily disposed of without high transactions costs and with relative certainty as to its value is, The property of money that allows for the settling of debts that mature in the future is and more.
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Liquidity refers to the ease with which an asset can be converted into the economy's medium of exchange. Since money is an economy's medium of exchange, it is the most liquid asset. Financial assets, like stocks and bonds, can usually be sold easily in financial markets, and are thus relatively liquid.
- Measuring Money: Currency, M1, and M2
- M1
- M2
- Other Money
We defined money as anything that is generally accepted as a means of payment, is a store of value, can be used as a unit of account or a standard of deferred payment. What exactly is included? Cash in your pocket certainly serves as money. But what about checks or credit cards? Are they money, too? Rather than trying to state a single way of measu...
M1 is the most narrow definition of the money supply. It includes coins and currency in circulation—in other words they are not held held by the U.S. Treasury, or the Federal Reserve Bank, but circulate in the economy. Closely related to currency are checkable deposits, also known as demand deposits. These are the amounts held in checking accounts....
A broader definition of money, M2 includes everything in M1 but also adds other types of deposits. For example, M2 includes savings deposits in banks, which are bank accounts on which you cannot write a check directly, but from which you can easily withdraw the money at an automatic teller machine or bank. Many banks and other financial institution...
Where does “plastic money” like debit cards, credit cards, and smart money fit into this picture? A debit card, like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller. Thus, a debit card is every bit as much money as a check. It is important to note that in our definition o...
Jul 19, 2022 · Financial liquidity refers to how easily assets can be converted into cash. Cash, public stock, inventory, and some receivables are considered more liquid as a company or individual can expect to ...
- Jim Mueller
Jun 27, 2024 · A liquid asset is an asset that can easily be converted into cash in a short amount of time. Liquid assets include things like cash, money market instruments, and marketable securities. Both ...
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Historically, M1 money supply included those monies that are very liquid such as cash, checkable (demand) deposits, and traveler’s checks, while M2 money supply included those monies that are less liquid in nature; M2 included M1 plus savings and time deposits, certificates of deposits, and money market funds. Beginning in May 2020, the Federal Reserve changed the definition of both M1 and M2.
