Economics Investments

Q&A: What is liquidity?

Liquidity is how easily something can be converted into usable cash without affecting its market price.

Real-life examples
High liquidity: Checking accounts are highly liquid because it is already in cash and just needs to be accessed with a login, pin number, debit card, or check.

Low liquidity: A house is much less liquid because it must be sold, which means the seller must find a buyer, which can take months or even years. And if the seller does want to sell the home today, they will have to accept an offer far below the market price.

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