The Efficient-Markets Hypothesis States That

question 28

Multiple Choice

The efficient-markets hypothesis states that

• A)you can consistently outperform the stock market by efficient use of information
• B)financial markets are much more efficient than goods markets
• C)stock markets are only efficient if experts manage people's portfolios
• D)stock prices rarely change significantly based on unexpected new information
• E)none of the above

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Definitions:

Regressive Income Tax

A tax system where the tax rate decreases as the taxable amount increases, placing a higher relative burden on lower-income earners.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, reflecting the rate applied to each additional dollar of income.

Net Pay

The amount of money an employee receives after deductions like taxes and social security charges are subtracted from the gross pay.

Laffer Curve

A representation of the relationship between rates of taxation and the resulting levels of government revenue that illustrates there can be an optimum tax rate that maximizes revenue.