Why Are US

question 3

Multiple Choice

Why are U.S.housing and stock prices unlikely to rebound quickly from the recession of 2008-2009?

• A)Restrictive monetary policy will place downward pressure on asset prices.
• B)Lack of sufficient stimulus will decrease demand for housing and other assets.
• C)It will take time to correct the mal-investment generated by the run-up in housing prices.
• D)Based on Japan's experience of the 1990s,asset prices are likely to rebound quickly.

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Definitions:

Market Efficiency

A concept in financial economics that describes how well market prices reflect all available information, leading to assets being properly priced and markets allocating resources efficiently.

Financial Decision Maker

An individual or group responsible for making investment, financing, and dividend decisions within an organization.

Expected NPV

Projected Net Present Value; an estimation of a project's current value based on expected future cash flows discounted at the project's cost of capital.

Efficient Market

A financial market theory suggesting that asset prices fully reflect all available information, making it impossible to consistently achieve higher than average returns.