Liquidity describes how quickly and easily an asset can be turned into cash without losing much of its original value.

• Highly liquid assets: These are items like cash, banknotes, or money in a bank account that can be used immediately.
• Illiquid assets: These are items like real estate, land, or heavy machinery that take a long time and significant effort to sell.

Having enough liquidity is important for both people and businesses because it allows them to pay their bills on time. Central banks also track liquidity levels to keep the entire financial system stable.