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

1. Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price. 2. Currency (4) (physical cash like banknotes and coins) is the most liquid asset, as it is already in the form of cash and can be used immediately for transactions. 3. Demand deposits with the banks (1) (like current accounts) are highly liquid. Funds can be withdrawn or transferred on demand (e.g., via cheque, ATM, online transfer) with minimal delay or cost, making them almost as liquid as physical currency. 4. Savings deposits with the banks (3) are also very liquid, allowing easy access to funds. However, they sometimes have minor restrictions (like limits on the number of withdrawals) compared to demand deposits, making them slightly less liquid than demand deposits. 5. Time deposits with the banks (2) (like fixed deposits or certificates of deposit) are the least liquid among the given options. Funds are locked in for a specific period, and premature withdrawal usually incurs a penalty. Conversion to cash requires waiting until maturity or paying a penalty. 6. Therefore, the correct sequence of these assets in the decreasing order of liquidity is: Currency (4) > Demand deposits (1) > Savings deposits (3) > Time deposits (2).