The primary purpose of the money market is to provide a platform for managing short-term funding needs and ensuring liquidity within the financial system. Institutions such as banks, corporations, government entities, and even individuals participate in the money market to maintain their liquidity.Key Instruments in the Money Market1.Treasury Bills (T-Bills): These are short-term debt instruments issued by the government. They are considered one of the safest investments since they are backed by the full faith and credit of the government.3.Commercial Paper: This is an unsecured, short-term debt instrument issued by corporations to meet immediate funding needs. It is usually issued at a discount to face value and reflects the issuer’s credit quality.4. Repurchase Agreements (Repos): Repos involve the sale of securities with an agreement to repurchase them at a higher price at a later date. They are commonly used for short-term borrowing, primarily by dealers in government securities.Functions of the Money MarketThe money market serves several crucial functions in the economy:1. Liquidity Management: Institutions use the money market to manage their liquidity positions. For instance, banks might borrow funds overnight to meet reserve requirements.2.Interest Rate Determination: The money market plays a critical role in setting short-term interest rates, which influence economic activities like borrowing, spending, and investing.3.Funding for Governments and Corporations: Governments and corporations can raise short-term funds to manage cash flow and operational needs through money market instruments.The money market plays a crucial role in the global financial system, providing a platform for managing short-term funding needs and ensuring liquidity.