Definition of Money Market

The money market is an important segment of the financial system and deals with only short-term debt instruments at the wholesale level. The reason why the money market is an important aspect of the financial system is a large number of lending and borrowing transactions on daily basis.


The two most important users of money markets are large corporations and the government. Large corporations use the money market to raise short term funds and offer relatively fewer returns as the other longer-term debt instruments pay.


The government uses the money market to ensure a sustainable cash flow in the market. Investors can also enjoy small profits in the money market. Some common examples of money market instruments are commercial papers and certificates of deposits also called CDs.

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