Standard Life-Cycle Analysis Predicts That a Stock Market Crash That

question 54

Multiple Choice

Standard life-cycle analysis predicts that a stock market crash that suddenly reduces the sale value of stocks ________ consumption expenditures.

• A)reduces
• B)increases
• C)has no effect on
• D)All of the above are possible with a market crash.

---

Definitions:

Individual Security

A financial instrument such as a stock or bond that represents an ownership stake or debt obligation in a company or entity.

Total Risk

The sum of systematic and unsystematic risks affecting an investment or portfolio.

Systematic Risk

The risk inherent to the entire market or market segment, often impossible to mitigate through diversification alone.

Unsystematic Risk

Unsystematic risk, also known as company-specific risk or idiosyncratic risk, is the type of uncertainty that comes with a company or industry that can be mitigated through diversification.