Please determine whether the following statements about speculation in the market are true or false.
- Speculators help to keep prices level and steady
- Speculation sometimes leads to lower prices than there would be without speculation
- If speculators anticipate a price increase in the future, prices will initially drop when speculation occurs
- Speculators earn a profit by selling goods on the black market
- Speculation is only effective when there is a surplus of goods
It is trading with financial instruments that are unpredictable or risky in anticipation of huge rewards. The goal maximizes the advantage of market instability. Speculation is controlled in markets that price movements are volatile. The risk of loss is more in speculation due to the fluctuations.
Answer and Explanation:
Speculation helps to keep the supply flowing around the world.
Speculators make pushes in the expectation that in the future the contracts will be worth more.
Speculators make a profit when the contracts they bought gain more value.
Speculation is not related to the surplus of goods.
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from Finance 305: Risk ManagementChapter 3 / Lesson 8