The Recognition Time Lag Recognizes That It Takes Time

question 200

Multiple Choice

The recognition time lag recognizes that it takes time

• A) to collect information about the state of the economy.
• B) to get politicians to agree on the best policy to enact.
• C) for any change in policy to take effect and for people to recognize that the policies are effective.
• D) for the politicians to enact the policy once the need for change has been recognized.

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Definitions:

Market Portfolio

A theoretical portfolio that contains all assets in the market, with each asset weighted according to its market capitalization.

Required Rate

The minimum annual percentage return that an investment must yield to be considered a viable option by an investor.

Constant Growth DDM

A valuation model that estimates the value of a dividend-paying stock by using predicted dividends that grow at a constant rate in perpetuity.

Intrinsic Value

The inherent or true value of a security, based on underlying assets and earnings, independent of its market value.