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
Explanation
Liquidity refers to how quickly and easily an asset can be converted into cash without loss of value. Let's analyze the given assets:
1. Demand deposits with the banks – These can be withdrawn anytime on demand. Highly liquid.
2. Time deposits with the banks – These cannot be withdrawn before maturity without penalty. Less liquid.
3. Savings deposits with the banks – Can be withdrawn but often require notice; slightly less liquid than demand deposits.
4. Currency – Cash is the most liquid form of asset.
Arranging in decreasing order of liquidity: Currency > Demand deposits > Savings deposits > Time deposits