Which of the following best describes a money market?

Which of the following best describes a money market?

• A. A hub exclusively for borrowing long-term loans
• B. A marketplace for trading stocks and shares
• C. A hub for financial institutions wishing to borrow/lend for periods typically up to 12 months
• D. A marketplace for real estate transactions

Answer: (C)

A money market is best described as a hub for financial institutions wishing to borrow or lend for short-term periods, typically up to 12 months. This definition is accurate as the money market primarily involves financial instruments with high liquidity and short maturities, such as treasury bills, commercial paper, and certificates of deposit. The focus of the money market is on the management of short-term borrowing and lending needs, making it an essential component of the financial system. Financial institutions, such as banks and credit unions, utilize the money market to adjust their liquidity positions and to meet short-term financial obligations efficiently. By contrast, borrowing long-term loans pertains to long-term capital markets, where financial instruments typically have maturity periods longer than one year. Similarly, a marketplace for trading stocks and shares defines the equity market, which deals with ownership interests in companies rather than short-term financing instruments. Lastly, real estate transactions fall under the real estate market and are not related to the money market's scope of short-duration lending and borrowing.

A money market is best described as a hub for financial institutions wishing to borrow or lend for short-term periods, typically up to 12 months. This definition is accurate as the money market primarily involves financial instruments with high liquidity and short maturities, such as treasury bills, commercial paper, and certificates of deposit.

The focus of the money market is on the management of short-term borrowing and lending needs, making it an essential component of the financial system. Financial institutions, such as banks and credit unions, utilize the money market to adjust their liquidity positions and to meet short-term financial obligations efficiently.

By contrast, borrowing long-term loans pertains to long-term capital markets, where financial instruments typically have maturity periods longer than one year. Similarly, a marketplace for trading stocks and shares defines the equity market, which deals with ownership interests in companies rather than short-term financing instruments. Lastly, real estate transactions fall under the real estate market and are not related to the money market's scope of short-duration lending and borrowing.