The money market assists the RBA carry out its functions by:

Question

Quizplus · Accepted Answer

The money market performs multiple functions that assist the RBA in carrying out its functions.

A) The money market contributes the banking system's liquidity by providing a platform for the banks to borrow and lend short-term funds from and to each other. The RBA uses this platform to influence the overall liquidity in the banking system.

B) The money market holds reserves of ES funds, which are the funds that the banks are required to hold with the RBA as a fraction of their deposits. This helps the RBA to manage the banks' liquidity and solvency.

C) The money market provides a forum for the implementation of monetary policy. The RBA can use its monetary policy tools, such as open market operations, to influence the interest rates and liquidity in the money market.

D) The money market contributes to the financial system's stability by providing the banks and other financial institutions with a reliable source of short-term funds. This helps them to manage their short-term liquidity needs and avoid funding squeezes.

Therefore, all of these functions of the money market are important for the RBA to carry out its functions effectively.

The Money Market Assists the RBA Carry Out Its Functions