The secondary market is best defined as the market:

• A. where goods and services are exchanged between producers and consumers
• B. where new financial assets are created and sold for the first time
• C. where previously issued financial assets are bought and sold among investors
• D. where government sets prices for essential commodities

Answer: (C)

Verified step by step guidance

1. Understand the definition of the secondary market in financial economics: it is the market where financial assets that have already been issued are traded among investors.
2. Recall that the primary market is where new financial assets are created and sold for the first time, typically by producers or issuers to initial investors.
3. Recognize that the secondary market differs because it involves the buying and selling of existing securities, not the creation of new ones.
4. Eliminate options that describe transactions between producers and consumers of goods and services, as these pertain to product markets, not financial markets.
5. Also eliminate options involving government price setting, as this is unrelated to the definition of the secondary market.