Overview
Money market dynamics play a crucial role in the financial system by facilitating short-term borrowing and lending. These markets are characterized by high liquidity and low risk, making them essential for managing cash flow and financing immediate needs. Key instruments include Treasury bills and c...
Key Terms
Example: Cash is highly liquid, while real estate is less so.
Example: Investors buy Treasury bills for safe, short-term investments.
Example: Companies use commercial paper to finance short-term liabilities.
Example: Banks often use repos to manage liquidity.
Example: Higher interest rates can discourage borrowing.
Example: The Federal Reserve adjusts interest rates to control inflation.