Answered: What are the money markets and what are…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What are the money markets and what are the capital markets? How do they differ? What are their respective activities?

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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Step 1

Money market:

1)Money market is a short-term market where instruements like commercial papers, treasury bills, certificate of deposits, etc.
2) The risk is low in the money market
3) It inlcudes instruments like: treasury bills, trade credit, certificate of deposits, commercial papers, and so on.
4) Investors in the money market are commercial bank, central bank, non-financial institutions, chit funds and so on.
5) Money market is highly liquid.
6) The money market is casual in nature.

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