What is Liquidity & Inflation?

What does liquidity refer to?

• Liquidity refers to how easily an asset can be converted into cash without losing its value.

• Liquidity refers to the profitability of a company.

• Liquidity refers to the amount of debt a company has.

• Liquidity refers to the market share of a company.

Which of the following is an example of HIGH liquidity? (liquidity = how quickly you can turn assets into cash)

• Real estate

• Money in a checking account

• Collectibles

• Stocks

What is inflation?

• Inflation is the general increase in prices over time, meaning your money buys less than it used to.

• Inflation is the decrease in prices over time, meaning your money buys more than it used to.

• Inflation is the process of printing more money by the government.

• Inflation is the increase in the value of money over time.

• Liquidity

• Inflation

• Deflation

• Stagnation

What is interest according to the passage?

• Interest is basically the thank-you money the bank gives you for letting them hold onto your money.

• Interest is the fee you pay to the bank for keeping your money safe.

• Interest is a type of tax imposed by the government on savings.

• Interest is a penalty charged by the bank for withdrawing money early.

Explain the process of how banks use your money according to the passage.

• Banks keep your money in a vault and do not use it.

• Banks use your money to make loans to other customers.

• Banks invest your money in the stock market without your consent.

• Banks use your money to pay their employees' salaries.

Banks pay you interest because:

• they want to attract more customers.

• they need to make a profit.

• they use your money to lend to others.

• they are required by law.

When you deposit money in a bank, what happens?

• The money is stored in a vault.

• The bank uses it for investments.

• It is converted to gold.

• It is sent to the government.

The benefit for you when you deposit money in a bank is:

• Earning interest on the deposited amount

• Losing money due to bank fees

• No benefit at all

• Immediate access to a loan

In the super simple example, if you put $100 in a savings account, how much do you have after one year if the bank pays you 1% interest?

• $100

• $101

• $102

• $99