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 Demand deposits with the banks – These can be withdrawn anytime on demand.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 Time deposits with the banks – These cannot be withdrawn before maturity without penalty.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 Savings deposits with the banks – Can be withdrawn but often require notice; slightly less liquid than demand deposits. 4.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