Liquidity is the amount of capital that is available for investment and spending. Most of the capital is credit rather than cash.
High liquidity means there is a lot of capital. That usually happens when interest rates are low, and so capital is easily available. Low interest rates mean credit is cheap, which reduces the risk of borrowing. That’s because the return only has to be higher than the interest rate, so more investments look good. In this way, high liquidity spurs economic growth.
Roshani Mishra
Liquidity is the amount of capital that is available for investment and spending. Most of the capital is credit rather than cash.
High liquidity means there is a lot of capital. That usually happens when interest rates are low, and so capital is easily available. Low interest rates mean credit is cheap, which reduces the risk of borrowing. That’s because the return only has to be higher than the interest rate, so more investments look good. In this way, high liquidity spurs economic growth.