Question

Increasing liquidity in the economy is generally done when there is _____

(a) excess aggregate demand
(b) deficient aggregate demand
(c) excess aggregate supply
(d) neither of (a) and (c)​

Answer 1

d

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Answer 2

Option “A” is correct i.e., excess aggregate demand.

• Increase in liquidity in the economy generally increases when there is an excess demand rate.

• Money is seamlessly liquid. Other possessions are not as liquid as money, but many are more liquid than others.  

• One of the chief features of the financial catastrophe is that some assets turn out to be less liquid than they had formerly been.

• A fall in the liquidity of those assets could decrease aggregate demand.

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