Quiz 4 - The Origins of Stock Markets and a "Tulip Mania"

A futures contract is a legal agreement to buy or sell a particular commodity at a predetermined price at a specified time.

• True

• False

These markets enable investors to buy and sell shares and other securities they already own anytime.

• Stock markets

• Secondary markets

• Primary markets

• None

A spontaneous order is a self-regulating system that can be investigated using reason but is not created by any one person's design.

• True

• False

If the stock markets are spontaneous orders, what is needed to induce a contract between participants in the market?

• Law enforcement by the government

• Reciprocity and reputation mechanisms

• Coercion by the authorities

• None

Is it possible that a system of private governance emerges to regulate stock markets and help enhance capitalism?

• Yes

• No

It is a financial instrument with a price that is based on a different asset.

• Derivative

• Stock

• Auction

• None

"Once the concept of the 'azen' had taken hold, these 'azens' could be traded on their own account without the bulbs actually changing hands at all". This quote by Pavord reflects the idea of the 'azen' as a standard of measure. What type of financial instrument was?

• A collateralized debt obligation

• An underlying asset

• A future

• None

The futures exchange had a clearing association that serves guarantor of all futures contracts and reduces the risk of default significantly.

• True

• False

These markets enable investors to issue new securities and access to initial capital.

• A secondary market

• A primary market

• A stock market

• None

The Dutch market for tulip futures arose because of a convergence of factors. What are those factors?

• Law enforcement and regulations by the Dutch government

• Increased globalization, and specialization in commerce and finance

• A prosperous upper-class with no legal regulations

• None