1. The flow of money has a direct effect on how the economy performs. 2. Liquidity is variable, depending on the nature of the asset.
Understand the Problem
The question presents two true/false statements related to economic concepts regarding the flow of money and liquidity.
Answer
Both statements are true.
- True 2. True
Answer for screen readers
- True 2. True
More Information
The flow of money, or cash flow, influences economic activity by affecting the spending and investment behaviors of economic agents. Liquidity varies based on how quickly an asset can be converted into cash, which depends on the asset's nature.
Tips
A common mistake is misunderstanding liquidity: it does indeed vary depending on the asset's characteristics and market conditions.
Sources
- What Is a Liquid Asset, and What Are Some Examples? - Investopedia - investopedia.com
- Cash Flow: What It Is, How It Works, and How to Analyze It - investopedia.com
- The Transmission of Monetary Policy | Explainer | Education | RBA - rba.gov.au
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