Summary: liquid assets that can be quickly converted into cash. This theory emphasizes that the availability and ease of converting assets into cash play a crucial role in influencing economic activity and the general price level. Unlike traditional quantity or income theories of money, the liquidity theory argues that fluctuations in the volume of money in the economy or changes in income levels do not solely determine economic conditions. Rather, the concept of liquidity, encompassing a broader range of assets that can be readily mobilized, is seen as the key factor affecting business decisions, spending, and investment patterns. The liquidity theory proposes a more nuanced and dynamic understanding of the relationship between money and economic activity, shedding light on the intricate linkages between monetary conditions and overall business outcomes.