2
FINANCIAL MARKETS AND THE BUSINESS CYCLE
Answers
1. D.
2. A.
3. B. Because the speculative positions are being unwound very quickly due to margin calls. However, a sustainable commodity rally does not develop until the economy tightens sufficiently to result in a fundamental increase on the demand side.
4. B. Each cycle has its own characteristics, in that distortions develop in different sectors. For example, in 1970, it was housing; 1973 in the commodity arena; in the mid-1980s in the S&Ls; in 2000, the tech boom; in 2007 housing; and so forth.
5. B. Growth recessions (double cycles) still experience the financial market rotation.
6. B. This is because the long lead time indicates a weak economy in which substantial cost reductions result ...
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