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Credit is considered a liquidity medium because it provides individuals and businesses with immediate access to funds that can be used to meet financial obligations or invest in opportunities without having to rely solely on their available cash reserves. By extending credit, financial institutions and lenders help to facilitate economic activity and stimulate growth by allowing borrowers to access funds when they are needed, thus improving liquidity in the overall economy.

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1y ago

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Related Questions

What term means the ability to turn assets into cash quickly or having access to credit?

liquidity


What mechanism is used by commercial banks for providing credit to government?

statutory liquidity ratio


What are the factor does not affect credit creation power of commercial bank?

Statutory liquidity ratio


What is the effect of credit policy on performance profitability and liquidity?

The credit policy generally demands payment. Working class professionals will generate more money in order to sort out credit requirements.


Which term means the ability to turn assets into cash quickly or having access to credit?

Liquidity :P BB


How might a statement of cash flows be used?

You might use it to apply for credit (a loan).


What is 6 letter word for debt medium?

credit


What is ment by CRR?

CRR MEANS CASH RESERVE RATIO IS A DECLINE IN THE LIQUIDITY OF A ECONOMY THIS IS CREDIT RESERVE RATION IN WHICH A COMMERCIAL BANK HAVE MAINTAIN A PERCANGE OF BALANCE WITH RBI CRR MEANS CASH RESERVE RATIO IS A DECLINE IN THE LIQUIDITY OF A ECONOMY


How do you cure credit crunch?

By easing the monetary policies. By reducing cash reserve ratio, statutory liquidity ratio and repo rate, the amount of cash in circulation in the economy can be increased. This can help cure credit crunch...


What are the five problems of today?

1. Low liquidity in the economy (Credit Crunch) 2. Unemployment 3. GDP is coming down (I have added 3)


Factors affecting firm liquidity?

Firm liquidity is influenced by several key factors, including cash flow management, inventory levels, and accounts receivable turnover. Effective cash flow management ensures that a company can meet its short-term obligations, while excessive inventory can tie up resources and reduce liquidity. Additionally, the efficiency in collecting receivables impacts the availability of cash, as slower collection can lead to liquidity challenges. External factors such as market conditions and access to credit also play a significant role in a firm's liquidity position.


Prime interest rate falls when?

when banks have more liquidity in their net. every bank have have to reduce their lending rates in order to attracting their credit-worthy customers