What term is used to describe a stock market that is experiencing a general decline in prices?

What term is used to describe a stock market that is experiencing a general decline in prices?

• A. Bear market
• B. Bull market
• C. Option trading
• D. SEC

Answer: (A)

The term that describes a stock market experiencing a general decline in prices is known as a bear market. In financial contexts, a bear market is typically identified by a drop of 20% or more in stock prices, and it reflects widespread pessimism among investors. This environment often leads to reduced consumer spending and lower levels of investment, as the assumption is that the downward trend will continue. In contrast, a bull market is characterized by rising prices and investor confidence. Option trading refers to a type of financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price. The SEC, or Securities and Exchange Commission, is a regulatory body that oversees securities transactions, ensuring fair and efficient markets, but it does not describe market conditions. Thus, the bear market clearly defines a phase of price declines, distinguishing it from these other terms.

The term that describes a stock market experiencing a general decline in prices is known as a bear market. In financial contexts, a bear market is typically identified by a drop of 20% or more in stock prices, and it reflects widespread pessimism among investors. This environment often leads to reduced consumer spending and lower levels of investment, as the assumption is that the downward trend will continue.

In contrast, a bull market is characterized by rising prices and investor confidence. Option trading refers to a type of financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price. The SEC, or Securities and Exchange Commission, is a regulatory body that oversees securities transactions, ensuring fair and efficient markets, but it does not describe market conditions. Thus, the bear market clearly defines a phase of price declines, distinguishing it from these other terms.