Final answer:
Liquidity is the ability to convert assets into cash quickly and easily, crucial for economic stability.
Explanation:
Liquidity is the ability to convert assets into cash quickly and easily. It is a measure of how fast an asset can be turned into cash without significant loss in value. For example, cash is the most liquid asset as it can be used immediately for transactions.
Other assets like real estate are less liquid because they require a longer process, like selling, to convert them into cash. The concept of liquidity is crucial for understanding economic stability and risk management.
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