How Does Hedging Affect the Flow of Funds in the Financial

question 104

Multiple Choice

How does hedging affect the flow of funds in the financial system?

• A) It reduces it since it is a sign that investors do not like risk.
• B) It reduces it because it increases risk by encouraging speculation.
• C) It increases it because it reduces risk thus encouraging more people to make financial investments.
• D) It increases it by encouraging more speculation.

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Definitions:

House of Representatives

The lower chamber of the United States Congress or other legislatures, whose members are elected to represent districts in the legislative process.

John Quincy Adams

The sixth President of the United States, who previously played key roles in diplomacy and politics, and was notably involved in the "Corrupt Bargain" controversy.

Corrupt Bargain

A term referring to the alleged behind-the-scenes deal made during the 1824 U.S. presidential election, which supposedly led to John Quincy Adams being elected President and Henry Clay becoming his Secretary of State.

American System

An economic plan that played a significant role in American policy during the early 19th century, advocating for a strong federal government to create a protective tariff, a national bank, and internal improvements.