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Question

Which of the following best describes a

"pyramid scheme?"

A. It will help the people involved get rich.

B. It always makes everyone money.

C. It is run and organized by the banks.

D. It is not legal in any state.

Answer

A. It will help the people involved get rich.

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A pyramid scheme is a fraudulent business model that promises participants high profits based on recruiting others into the scheme rather than selling actual products or services. The scheme operates by recruiting an initial group of people at the top of the pyramid, who are then required to recruit others beneath them. Each new participant is required to make a financial investment or purchase a product, with the promise of receiving a portion of the investments made by subsequent recruits. The scheme collapses when it becomes unsustainable to recruit new participants, leaving those at the bottom of the pyramid with little to no return on their investment. While some individuals at the top may make money, the majority of participants ultimately lose their investments. Pyramid schemes are illegal in many countries, including the United States, as they are considered fraudulent and deceptive practices.