If People Have Rational Expectations

question 41

Multiple Choice

If people have rational expectations,

• A)the stock market may be overvalued.
• B)the stock market may be undervalued.
• C)stock prices are nonvolatile.
• D)stock prices always equal their fundamental value.

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Definitions:

Mechanical Energy

The energy possessed by an object due to its motion or position, capable of producing mechanical work.

Electrical Energy

The form of energy resulting from the flow of electric charge, widely used for domestic, commercial, and industrial applications.

Torque

A measure of the force that can cause an object to rotate about an axis.

Mechanical Work

The transfer of energy from one object to another to cause movement against a force.