Question

Traders at a stock exchange notice that five traders on the floor seem to be selling more yen and purchasing more euros because of an expected decline in the yen. As a result, all other traders started to do the same. This is an example of the ________ that creates a self-fulfilling prophecy when the yen does decline in value.

Multiple Choice

• difference principle

• tragedy of the commons

• arbitration process

• bandwagon effect

• spot exchange rate

Answer 1

raders at a stock exchange notice that five traders on the floor seem to be selling more yen and purchasing more euros because of an expected decline in the yen. As a result, all other traders started to do the same. This is an example of the Bandwagon Effect that creates a self-fulfilling prophecy when the yen does decline in value.

Bandwagon is basically a following the herd mentality. When a person aligns his thoughts and beliefs with the commonly followed thoughts and beliefs.

bandwagon effect is the right answer.

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