Classify the following events as mostly systematic or mostly unsystematic and te
ID: 1150499 • Letter: C
Question
Classify the following events as mostly systematic or mostly unsystematic and tell us why. Is the distinction clear in each case?
a) Short term interest rates increase unexpectedly
b) The interest rate a company pays on its short-term debt borrowing is increased by its bank.
c) Oil prices unexpectedly decline
d) An oil tanker ruptures, creating a large oil spill
e) A manufacturer loses a multimillion dollar product liability suit
f) A Supreme Court decision substantially broadens producer liability for injuries suffered by product users.
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Explanation / Answer
Systematic means fixed plan or which is expected and regular. Unsystematic means which is unexpected and irregular.
a) Short-term interest rates increase unexpectedly, that is there was no plan. This is unsystematic.
b) The interest rate a company pays on its short-term debt borrowing is increased by its bank. But it is not known that this increase interest rate was announced previously or suddenly it is increased, So we can not distinguish between systematic and unsystematic event here.
c) Oil price unexpectedly decline. As it is unexpected so it is unsystematic
d) An oil tanker ruptures, creating a large oil spill. This creation can not possible in a short time span. Thus this is known to everyone and not unexpected. So it is a systematic event.
e) A manufacturer loses a multimillion-dollar product liability suit. Any loss is unexpected so this is an unsystematic event.
f) A Supreme Court decision substantially broadens producer liability for injuries suffered by product users. It is not known that the Supreme Court take this decision suddenly or it was announced before. So we can not say whether it is a systematic or unsystematic event.