The money market contributes to the banking system by:

Question

Quizplus · Accepted Answer

The money market serves various purposes to the banking system. Firstly, it is the main location for banks' liquid reserves, where they can lend or borrow in the interbank overnight market using instruments such as term deposits, repo agreements, and short-term loans. Secondly, the RBA can drop its requirement that banks hold liquid reserves with it due to the availability of the money market. Thirdly, the money market is a source of funds for banks, mainly through the issuance of Negotiable Certificate of Deposits (NCDs). Lastly, banks that accept bills can sell them to investors and raise funds. Therefore, all of these options are correct.

The Money Market Contributes to the Banking System By