#Liquidity101 Liquidity, in economics, represents the quality of assets to be converted into cash immediately without significant loss of value. Therefore, the easier it is to convert an asset into money, the more liquid it is said to be. By definition, the asset with the highest liquidity is money; that is, bills and coins have absolute liquidity, likewise, demand deposits, known as bank money, also enjoy absolute liquidity and therefore are also considered money from a macroeconomic perspective.

For example, a very liquid asset is a deposit in a bank whose holder can at any time go to the institution and withdraw it, or they can also do so through an ATM. In contrast, a less liquid good or asset may be a real estate property where, from the moment the decision is made to sell it or convert it into money until the money from its sale is actually obtained, a prolonged period may have elapsed. If one wishes to convert it quickly into money, a loss of value regarding its target market price would have to be assumed.