A Stock Market Crash Which Causes Share Prices to Fall

question 90

Multiple Choice

A stock market crash which causes share prices to fall should cause:

• A)a decrease in consumption spending.
• B)an increase in consumption spending.
• C)an increase in wealth.
• D)no change in consumption spending.

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Definitions:

Zero Coupon Interest Rate

An interest rate that applies to a bond or loan that does not pay periodic interest, only paying the face value at maturity.

Arbitrage Profit

The profit realized from exploiting the price difference of the same or similar financial instruments on different markets or in different forms.

Stock Index

A statistical measure which tracks the performance of a basket of stocks, representing a segment of the stock market.

T-bond Futures

Futures contracts that obligate the buyer to purchase U.S. Treasury bonds at a specified price at a future date, used for hedging and investing purposes.