What is the difference between money market and stock exchange market? Which is more important to the economy?
The money market includes financial securities such as T-Bills, commercial papers, repos and certificates of deposits to name a few. The are seen as safe investments with low returns, and a place for quick money at a low interest rate to cover for a cash shortage. The bid ask spreads in this market are relatively low due to its liquidity and size. The stock exchange market (ie Stock Market) is seen as riskier and with higher returns. The stock market involves traders trading shares of companies between one another in anticipation of capital growth and/or dividend yields. When you buy 20 shares of Exxon, you bought these shares from another trader who was willing to sell them at that price. These shares mean that you own part of the business (as minuscule as it is), and you therefore profit when it grows and lose when profits fall. The money market is typically used by large institutions and governments to manage their short-term cash needs. The money market is part of the fixed-income
