If the Market Is Semistrong-Form Efficient,then Which One of the Following

question 21

Multiple Choice

If the market is semistrong-form efficient,then which one of the following statements is true?

• A) Neither technical nor fundamental analysis leads to abnormal profits.
• B) Technical analysts have the ability to earn excess profits but fundamental analysts cannot.
• C) Fundamental analysts can earn excess profits but technical analysts cannot.
• D) Both technical and fundamental analysts earn excess profits based on their research.
• E) No answer can be determined as the form of market efficiency is unrelated to abnormal, or excess returns.

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Definitions:

APC

The abbreviation for Average Propensity to Consume, which is the fraction of income that is spent on consumption rather than saved.

Marginal Propensity

This term explains the tendency of an individual or household to spend an additional unit of currency. For example, the marginal propensity to consume indicates how much consumption will increase with an additional dollar earned.

Disposable Income

The residual financial resources for households to use in saving and spending post paying income taxes.

Savings Rate

The Savings Rate is the percentage of income that is not spent on consumption but instead saved for future expenses, investments, or emergencies.