Even if the economy is declining, the financial market can still do well.

True or False

The right answer is:

True

Explanation:

Different Financial Markets work in different ways, some of them even work on speculation. Even if the economy is declining, some financial markets may be doing well or even better than when the economy was expanding.

If you're an importer for example and you're importing raw materials when the exchange rate is weaker, that would result in higher costs to you. What if you're predicting that the exchange rate is only going to get weaker in six month's time?

What you might do is buy your currency in the currency market, which is a type of Financial Market, buy now at the current exchange rate let it get a profit for you in six month's time.

You may be a speculator or a gambler and if you think that in six month's time the exchange rate is going to get stronger, what you might do is buy your currency now at the current exchange rate, let that get delivered to you in six month's time when the exchange rate has stronger and then you've made a big profit.