Inflation, recession, and high interest rates are economic events that are best characterized as being

Question

BlackTom AI · Accepted Answer

The question asks us to classify inflation, recession, and high interest rates in relation to market risk.

Inflation refers to the general rise in price levels, which erodes purchasing power and can influence asset prices, corporate earnings, and investor sentiment. This makes inflation a factor that can create market volatility and risk for investments.

A recession represents a broad, sustained decline in economic activity, typically leading to lower revenues, higher unemployment, and greater uncertainty in financial markets. Recessions are classic drivers of market risk because they can cause widespread asset price declines and increased volatility.

High interest rates affect borrowing costs, corporate profits, and the present value of future cash flows. They can lead to lower stock valuations and tighter credit conditions, contributing to market risk as investors reassess risk and return trade-offs.

Given these explanations, inflation, recession, and high interest rates are indeed factors that contribute to market risk; they are not isolated or unique to one sector but are systemic macroeconomic conditions that influence market-wide risk.

Regarding the lack of answer options: the provided data shows an answer stating that these factors are 'among the factors that are responsible for market risk.' This aligns with the reasoning above, since they collectively contribute to market risk rather than being the sole determinants or irrelevant factors.

In summary, these macroeconomic phenomena function as components of market risk, affecting asset prices, volatility, and investor expectations across markets.

Business Finance Chapter 08 Quiz

Inflation, recession, and high interest rates are economic events that are best characterized as being

View Explanation

Log in for full answers

Similar Questions

What is the primary distinction between market risk in the trading book versus the banking book?

An unexpected post on social media caused the prices of 22 different companies’ stocks to immediately increase by 10 to 15 percent. This occurrence is best described as an example of ________ risk.

Which type of risk involves financial loss due to market fluctuations?

In the context of the Capital Asset Pricing Model (CAPM), the relevant risk is

Market risk tends to rise when recent news has been more surprising than before.

Market risk tends to rise when the market anticipates important but uncertain news events.

Market risk tends to rise when recent news has been more surprising than before.

Market risk tends to rise when the market anticipates important but uncertain news events.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler