A High P/E Ratio Always Indicates That a Stock Is

question 8

True/False

A high P/E ratio always indicates that a stock is overpriced by the market.

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Definitions:

Productivity Growth Rate

The productivity growth rate measures how the efficiency of production in an economy increases over time, often reflected in the output per unit of input, such as labor hours, over a specific period.

Output

Refers to the total amount of goods and services produced by an economic system over a specific period.

Short Run

A term used in economics to describe a period during which at least one input, such as plant size, is fixed and cannot be changed by the firm.

Long Run

A period in which all factors of production and costs can be varied, and all market adjustments have been made.