The Theory of Efficient Markets

question 94

Multiple Choice

The theory of efficient markets:

• A) rules out high returns due to chance.
• B) says insider information makes markets less efficient.
• C) allows for higher than average returns if the investor takes higher than average risk.
• D) assumes people have equal luck.

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Definitions:

Percentage Rise

A measure of how much a quantity increases over a period, expressed as a percentage of the initial value.

Equation of Exchange

An economic formula representing the relationship between the money supply, its velocity, the price level, and the number of transactions in an economy: MV = PQ.

Economy Output

The total value of all goods and services produced by an economy over a specific time period, also known as gross domestic product (GDP).

Equation of Exchange

The Equation of Exchange is an economic identity that relates the supply of money in an economy to the value of goods and services transactions, commonly represented as MV = PQ.