Consider the following liquid assets : 1. Demand deposits with the banks 2. Time deposits with the banks 3. Savings deposits with the banks 4. Currency The correct sequence of these assets in the decreasing order of liquidity is

Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price [4]. Currency is the most liquid asset as it is universally acceptable and serves as the primary medium of exchange [3]. Demand deposits follow, as they can be withdrawn or used for transactions via checks immediately [3]. Savings deposits are slightly less liquid than demand deposits because they may have certain withdrawal restrictions or are intended as 'near money' [3]. Time deposits (fixed deposits) are the least liquid among the four because they are held for a fixed term to earn higher interest, and early withdrawal often incurs penalties or requires notice, shifting their feature from a 'medium of exchange' to a 'store of value' [2]. Therefore, the decreasing order of liquidity is Currency (4), Demand deposits (1), Savings deposits (3), and Time deposits (2).

Sources

1. [4] https://www.investopedia.com/terms/m/m1.asp
2. [2] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Box 3.1: Demand and Supply for Money : A Detailed Discussion > p. 43
3. [3] https://www.investopedia.com/terms/l/liquidity.asp
4. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > TOOLS TO MEASURE MONEY SUPPLY > p. 159