A Martingale Has the Property That

question 60

Multiple Choice

A martingale has the property that

• A) it is inherently unpredictable.
• B) the best prediction of its value tomorrow is its value today.
• C) the best prediction of its future growth rate is its current growth rate.
• D) the best prediction of its value tomorrow can be computed by looking at its past behavior.
• E) the best prediction of its value tomorrow can be computed by looking at the past two periods.

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Definitions:

Utility Maximization

The economic principle that individuals or firms attempt to allocate their resources in a manner that maximizes their satisfaction or profit.

Marginal Utility

The supplementary enjoyment a consumer experiences when they consume an extra unit of a good or service.

Budget Constraints

Budget constraints represent the limitations on the spending choices of consumers based on their income and the prices of goods and services.

Total Utility

The overall satisfaction a consumer receives from consuming a particular quantity of goods or services.