Which is the most liquid form of money?
cash and currency in circulation
investment accounts
savings accounts
demand accounts

Option (a) is correct. The cash and currency in circulation is the most liquid form of money.

Further Explanation:

Liquidity:

The liquidity refers to an asset’s ability to convert it into cash. When the asset can be converted into cash quickly, it will be considered as a highly liquid asset. When the asset cannot be converted into cash quickly, it will be considered as a low liquid asset. The liquidity is an essential factor in the business as it states the efficiency of the company to pay its short-term obligations.

Justification for the correct and incorrect option:

a.

Cash and currency in circulation: This is the correct option because the cash and currency are the hard cash and considered as the most liquid asset.

b.

Investment accounts: This is an incorrect option because the investment can not be converted into cash faster than the cash and currency in circulation.

c.

Saving account: This is an incorrect option. The savings account is highly liquid, but there are restrictions on the per day withdrawal limit.

d.

Demand accounts: This is an incorrect option because cash is the highest form of liquidity.

Thus, option (a) is correct. The cash and currency in circulation is the most liquid form of money.

Learn More:

1. Learn more about the competitive market

2. Learn more about the interest rate

3. Learn more about the investment  

Answer Details:

Grade: Middle school

Chapter: Liquidity

Subject: Business studies

Keywords: most, liquid, form, money, cash, currency, circulation, investment, accounts, savings, accounts,  demand, accounts.

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