Question

Arrange the following components of monetary aggregates in descending order as per their liquidity: 

(A) currency notes 
(B) demand deposits 
(C) time deposits 
(D) money market mutual fund 
Choose the correct answer from the options given below: 
 

• A. (A), (B), (C), (D)
• B. (B), (A), (C), (D)
• C. (D), (A), (B), (C)
• D. (C), (B), (D), (A)

Hint:

Liquidity is an important concept when evaluating assets, as it impacts their ability to be converted to cash.

Answer 1

The Correct Option is A

Step 1: Monetary Aggregates Overview.
Monetary aggregates are classified by their liquidity, with currency representing the highest level of liquidity.

Step 2: Liquidity Ranking of Components:
- (A) Currency notes are the most liquid due to their immediate usability in transactions.
- (B) Demand deposits offer high liquidity, though slightly less than currency.
- (C) Time deposits, characterized by their fixed term, are less liquid than demand deposits.
- (D) Money market mutual funds, despite being relatively liquid, are the least liquid among these options.

Step 3: Final Liquidity Order.
The sequence from most to least liquid is: Currency notes (A), followed by demand deposits (B), then time deposits (C), and finally money market mutual funds (D).

Step 4: Conclusion.
The established order is (A), (B), (C), (D), thus the correct selection is (1).