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Question

Consider the following liquid assets:

1.Demand deposits with the banks
2.Time deposits with the banks
3.Savings deposits with the banks
4.Currency

The correct sequence of these decreasing order of Liquidity is
(a) 1-4-3-2
(b) 4-3-2-1
(c) 2-3-1-4
(d) 4-1-3-2

Answer:

D

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Explanation:

Currency is the most liquid asset as it is readily available and can be used for transactions. Demand deposits with the banks (such as checking accounts) come next in terms of liquidity, as they can be easily accessed and used for payments. Savings deposits with the banks have slightly lower liquidity, as they may have withdrawal restrictions or require some processing time. Time deposits with the banks have the least liquidity among the options provided, as they have fixed maturity periods and limited withdrawal options.

So, the correct answer is (d) 4-1-3-2.

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