How did buying on margin reinforce the bull market (a market in which share prices rise, thus encouraging buying)? a. it allowed more people to invest in the stock market. b. it reduced the risk associated with buying stocks. c. it allowed investors to make a profit even when stock prices dropped. d. it reduced the total price investors had to pay for a stock.

The correct answer is A.

Buying on margin consists on acquiring an asset by borrowing the required amount from a bank or financial institution. Therefore, the level of income available of buyers means an smaller contraint for investing under this system, as a person can buy assets even tough he/she does not have the payable amount at the time of the purchase.

Therefore, this buying practice increases the number of participants in financial markets, for example in the stock market. If the amount demanded increases, so does the price and hence demand is also encouraged to grow even further.

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