"Buy low and sell high is advice given to people who want to make a profit by buying and selling shares of stock. Arbitrage is defined as buying a product in one market at a low price and reselling it in another market at a high price
Therefore, when stock brokers buy and sell stocks to earn a profit they are engaging in arbitrage." Evaluate this statement; state whether it is true or false and explain your answer.
The statement is false. Buying and selling shares of stock is not arbitrage. Arbitrage profits are earned when someone buys a product where its price is low and selling where it is high at the same time; there is no risk involved in arbitrage trades. If transactions costs are zero, arbitrage trades will cause prices to adjust so that they are equal in all markets. When shares of stock are purchased, the buyers do not know whether the price will increase or decrease in the future. There is a risk in buying stocks that their prices will fall; traders will earn a profit if prices rise but will suffer losses if prices fall.
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a. PxX + PyY = B. b. PxX + PyY = 1 / B. c. PxX = B + PyY. d. PxX / PyY = 1 ? B.
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a. True b. False Indicate whether the statement is true or false
Indicate how changes in monetary policy are transmitted to the goods and services market? Discuss for the case of an expansion in the money supply
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