Which of the Following Statements Is FALSE

question 60

Multiple Choice

Which of the following statements is FALSE?

• A) Derivatives help shift risk from risk-adverse investors to risk-takers.
• B) Derivatives assist in forming cash prices.
• C) Derivatives provide additional information to the market.
• D) In many cases, the investment in derivatives (both commissions and required investment) is more than in the cash market.
• E) Some derivatives trade hypothetical underlying assets.

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Definitions:

Rational Expectations Theory

A hypothesis proposing that individuals form forecasts about the future based on all available information in an unbiased and consistent manner.

Aggregate Output

Aggregate Output is the total value of all goods and services produced in an economy over a given period of time.

Active Policy

A government policy aimed at reducing unemployment and stimulating economic growth through proactive measures like tax cuts or increased government spending.

Monetary Policy Lags

The delay between the implementation of monetary policy decisions and their effects on the economy, often complicating central bank efforts to control inflation and stimulate economic growth.