________ Occurs When Market Participants Observe Returns on a Security

question 95

Multiple Choice

________ occurs when market participants observe returns on a security that are larger than what is justified by the characteristics of that security and take action to quickly eliminate the unexploited profit opportunity.

• A)Arbitrage
• B)Mediation
• C)Asset capitalization
• D)Market intercession

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Definitions:

Economic Contraction

A decline in national output as measured by GDP, often marked by a decrease in spending, investment, and general economic activity.

Aggregate Supply

The total supply of goods and services that firms in an economy are willing and able to sell at a given overall price level in a given time period.

Aggregate Demand

The total demand for all goods and services within a particular market or economy at a given overall price level and in a given period.

Real Exchange Rate

Measures the value of goods in one country compared to those in another, adjusting for price level differences.