Systemic Risk Is the Risk That a Large Decline in One

question 84

True/False

Systemic risk is the risk that a large decline in one stock's price could cause investors to sell their stock in other companies.

---

Definitions:

Long Run

In economics, a period in which all inputs can be adjusted by firms, and there are no fixed costs, allowing for full industry adjustment.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.

Fixed Cost

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and loan payments.