Give two conditions that are important to the efficient market theory. List one implication of the efficient market theory
Efficient market theory says that it should be very difficult to beat the market by finding undervalued stocks. The first condition is that lots of people are following the stock exchange closely, so that any new information will be quickly reflected in a change in the stock price. The second condition is that supply and demand determine the price. Thus, the market will balance the number of people who think the stock is overvalued with those who think it is undervalued. Consequently, it should be difficult to consistently beat the market.
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The quantity theory asserts that real GDP is
A) not influenced by the quantity of money. B) never different from potential GDP. C) equal to nominal GDP multiplied by the quantity of money. D) equal to nominal GDP divided by the quantity of money.
As output increases, the ATC
a. increases. b. decreases. c. remains constant. d. falls and then rises.
Consider the game between the teens from the previous question. In addition to any pure-strategy Nash equilibrium, there is another one in mixed strategies. In it, each teen chooses to declare with probability
a. 0.52 b. 0.5 c. 0.34 d. 0.1
Which of the following statements about crowding out is true?
a. It can completely offset the multiplier. b. It is caused by a budget deficit. c. It is not caused by a budget surplus. d. All of these are true.