Consider the following difference(s) between money markets and capital markets:

  1. While money markets are related to short term funds, capital markets are related to long term funds.
  2. While treasury bills are money markets instruments, national saving certificates are capital market instruments.

Which of the above statements is/are correct?

Answer: [C] Both 1 & 2

Money markets are short term funds with maximum maturity period up to 1 year. Capital markets are long term funds with minimum maturity more than a year.
National Saving Certificates have a lock-in of 5 years and 10 years, and hence cannot be included in money markets.Treasury bills have maximum maturity period of 91 days, 182 days, 273 days or 364 days i.e less than 1 year, and hence they are included under the money markets. Also, note that that money markets increases the short term liquidity in the market whereas; capital markets are mobilisation of savings.

This question is a part of GKToday's Integrated IAS General Studies Module