Question

Central government is a borrower in the money market through the issue of _______

• A. commercial papers
• B. trade bills
• C. treasury bills

Hint:

Associate the issuer with the instrument: {Corporations} issue Commercial Papers. The {Central Government} issues Treasury Bills. This simple association is key to answering many questions about money market instruments.

Answer 1

The Correct Option is C

Step 1: Understand the money market. The money market is a segment of the financial market for short-term borrowing and lending with maturities of one year or less. Step 2: Analyze the instruments listed. Commercial Papers (CPs) are short-term unsecured debt instruments issued by corporations. Trade Bills are instruments used to finance trade, typically between two business entities. Treasury Bills (T-Bills) are short-term debt instruments issued by the central government to raise funds and manage short-term liquidity needs. Step 3: Identify the government's instrument. Based on the definitions, Treasury Bills are the instrument used by the central government to borrow from the money market.