Financial markets are organized platforms where people can buy and sell securities like stocks, bonds, derivatives, currencies, and commodities. These markets are where businesses raise capital and mobilize funds. The main objective of a financial market is to fix prices for global trade, increase capital, and transfer risk and liquidity.
The money market is the foundation of all financial and capital markets. It's the medium through which the central bank injects and withdraws liquidity and steers short-term interest rates. It's also the medium through which financial institutions manage their liquidity by lending to and borrowing from one another.
The central bank is the apex body of a nation's monetary and banking system. It regulates and controls the entire banking system and monetary market of a country. It's also the sole agency of note issuing and controls the supply of money in the economy.
Financial markets and institutions not only affect our everyday life but also involve flows of billions of dollars of funds through our economy, which in turn affect business profits, the production of goods and services, and even the economic well-being of countries.
What happens to financial markets, financial institutions, and money is of great concern to politicians and often have a major impact on public mood & elections.
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