#liquidity Liquidity refers to how easily an asset can be converted into cash without affecting its market price. Cash is the most liquid asset, while real estate or collectibles are less liquid. In financial markets, high liquidity means assets can be bought or sold quickly with minimal price changes. This benefits investors by reducing transaction costs and making markets more efficient. Businesses also rely on liquidity to meet short-term obligations. Poor liquidity can lead to financial stress or insolvency. Central banks monitor liquidity to ensure market stability. Overall, liquidity is crucial for smooth financial operations and economic health.