When People Act in Their Self-Interest, What Typically Happens in a Market

question 95

Multiple Choice

When people act in their self-interest, what typically happens in a market system, according to Adam Smith?

• A) They help only themselves.
• B) They harm others.
• C) They help others, but not as much as they would have if they were not self-interested.
• D) They help others even more than when they seek to help others.

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Definitions:

Compound Rate

The rate at which a sum of money grows exponentially over time, considering the reinvestment of interest or earnings.

Coupon Rate

Annually, the return rate on a bond, presented as a percentage of its nominal price.

Bond's Duration

Bond's duration measures the sensitivity of a bond's price to changes in interest rates, quantified as the weighted average time until the bond's cash flows are received.

Time To Maturity

Time to maturity refers to the remaining time until a financial instrument, such as a bond or loan, reaches its scheduled end date and the principal must be repaid.