MONEY MARKET, STRUCTURE AND FUNCTIONS OF MONEY MARKETING, Definition: Money market can be defined as a market for short-term loans.
The market consists of institutions or individuals who either have money to lend or wish to borrow on a short-term basis.
The exchange of goods and services in markets is among the most universal activities of human life.
To facilitate these exchanges, people settle on something that will serve as a medium of exchange—they select something to be money.
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define money in relation to money market
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context.
The primary functions which distinguish money are as a medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment.
Money was historically an emergent market phenomenon that possess intrinsic value as a commodity; nearly all contemporary money systems are based on unbacked fiat money without the use value
Its value is consequently derived by social convention, having been declared by a government or regulatory entity to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for \”all debts, public and private\”
We can understand the significance of a medium of exchange by considering its absence.
Barter occurs when goods are exchanged directly for other goods. Because no one item serves as a medium of exchange in a barter economy, potential buyers must find things that individual sellers will accept.
A buyer might find a seller who will trade a pair of shoes for two chickens
24.1 What Is Money?
Define money and capital market.
conomic tools for nation building
factors affecting the expansion of industries
mineral resources and the mining industries
Identify the types and functions of the institutions.
Explain the types and features of securities.
Explain the process of and requirements for accessing the capital market
List the benefits of the capital market.
Demonstrate the understanding of the meaning, transaction and trading methods in the secondary market.
Instruments used in the money market
Treasury bills: Treasury bill is normally issued by the central bank of a country, which assists the government to borrow money from the money markets on short term basis.
Bill of exchange: Bill of exchange refers to a promissory note which shows the acknowledgement of indebtedness by a debtor to his creditor and his intention to pay the debt on demand or at an agreed time in future, normally ninety (90) days.
Call money funds: The call money fund or market is a special arrangement in which the participating institutions invest surplus money for their immediate requirement on an overnight basis with interest and withdrawal on demand.
The call money has the advantage of early return and at the same time is withdrawn able on demand. It provides a solution to the immediate stock of liquidity pressures in the money markets.
Institutions involved in the money market
Institutions involved in the money markets include:
Acceptance houses
Finance houses
Discount houses
Advantages of money market
Provision of finance: Money markets enable entrepreneurs and investors to raise enough finance through borrowing to run their businesses.
Creation of extra income: The money invested in the money market is capable of yielding extra income in the form of interest.
Promotion of economic development: Economic growth and development is enhanced through borrowing from money market.
Ability to recall invested funds: Funds invested in the money markets are very easy to recall.
It enhances savings: Money markets provide opportunity for those having a surplus fund to invest thereby enhancing savings.
The purpose of the money market is to facilitate the efficient allocation of short-term funds and provide liquidity to financial institutions and companies.
It allows them to meet their short-term funding requirements and manage their liquidity needs. The money market is considered a relatively safe and stable place to invest funds because of the short-term nature of the instruments involved and the low credit risk associated with them.
Some common instruments traded in the money market include:
- Treasury Bills (T-bills): Short-term debt securities issued by governments to raise funds.
total output continues to increase from 10 to 30, to 60, to 120 and so on. But as the fifth (5th) labour was used or employed, there was a drop in production from 120 to 100.
This is the stage at which the law of diminishing returns sets in as every additional unit of labour brings about a decrease in the total output
Importance of the law of diminishing returns
It is a platform for the buying and selling of highly liquid and low-risk financial instruments with maturities typically less than one year.
The main participants in the money market are banks, financial institutions, corporations, and government entities.
The purpose of the money market is to facilitate the efficient allocation of short-term funds and provide liquidity to financial institutions and companies.
It allows them to meet their short-term funding requirements and manage their liquidity needs.
The money market is considered a relatively safe and stable place to invest funds because of the short-term nature of the instruments involved and the low credit risk associated with them.
rather, they make use of physical effort or energy in production, hence their jobs are popularly referred to as brown-collar jobs.
