Final answer:
The correct answer is option 3. The federal funds market is the market where reserves can be borrowed by one bank from another bank for very short periods of time.
Step-by-step explanation:
The market where reserves can be borrowed by one bank from another bank for very short periods of time is the federal funds market. In this market, banks that have excess reserves can lend them to banks that are in need of additional reserves to meet their reserve requirements or to satisfy customer withdrawals. These loans are typically made overnight and the interest rate at which they are made is called the federal funds rate.