Explain how a well-functioning stock market contributes to the efficiency of the economy.
What will be an ideal response?
If the prices of stocks reflect fundamental values, the resource allocation mechanism of the stock market works well. With accurate signals investment resources flow to their most socially beneficial uses.
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Insurance is possible and can be profitable because of
A) private information. B) adverse selection. C) moral hazard. D) consumers are risk aversion.
Normative economics is:
a. usually incorrect. b. a statement of fact. c. the analysis of what is. d. the study of what ought to be. e. free of value judgments.
The Capital Asset Pricing Model determines the weighted average cost of capital
Indicate whether the statement is true or false
Supply-side economists argue that less government spending:
A. would make more investment capital available at lower rates of interest to the private sector. B. will result in more crowding out. C. causes higher rates of unemployment and inflation. D. would cause interest rates to increase dramatically.