Trading involves the exchange of goods and services for payment by money. Those wanting to purchase goods/services require money, while those selling expect to receive money.
The business world has developed to the stage where money is not only a medium of exchange, but it is also a commodity. Therefore, money itself is bought and sold.
The evolution and development of the money markets is closely linked to the business world’s requirement of this scarce commodity – money.
Money supply and Demand
Money may be in surplus -- due to large financial profits, completion of lucrative contact, unexpectedly high return on some investment.
Money may be in deficit -- heavy financial loss, insufficient yield in short-term from long term project, buying abroad and falling to cover adverse currency fluctuation.
Transactions
Transactions may be
1. Lending
2. Borrowing
3. Selling
4. Buying
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