During the past decade, the average rate of monetary growth has been 5%, and the average inflation rate has been 5%. Everything else held constant, if the Federal Reserve announces that the new rate of monetary growth will be 10%, the rational expectation forecast of the inflation rate will be
A) 5%.
B) between 5 and 10%.
C) less than 5%.
D) 10%.
E) more than 10%.
Answer: D
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MB Chapter 7
- _______ and ________ may provide an explanation for stock market bubbles.
- Psychologists have found that people tend to be ________ in their own judgments.
- ______ occurs when people are more unhappy when they suffer losses than they are happy when they achieve gains.
- Survey evidence does conclusively show that
- Survey evidence may be a poor guide to market behavior because
- Tests of rational expectations in markets other than financial markets required the use of survey data from market participants. One problem with using survey data is
- Your best friend calls and gives you the latest stock market "hot tip" that he heard at the health club. Should you act on this information? Why or why not?
- In a rational bubble, investors can have ________ expectations.
- A situation when an asset price differs from its fundamental value is
- The tech stock crash of 2000 is evidence in support of
- The efficient markets hypothesis suggests that investors
- The efficient markets hypothesis indicates that investors
- For small investors, the best way to pursue a "buy and hold" strategy is to
- The advantage of a "buy-and-hold strategy" is that
- Which of the following types of information most likely allows the exploitation of a profit opportunity?
- According to the efficient markets hypothesis, purchasing the reports of financial analysts
- The efficient markets hypothesis suggests that allocating your funds in the financial markets on the advice of a financial analyst
- Evidence against market efficiency includes
- Evidence in support of the efficient markets hypothesis includes
- Mean reversion refers to the fact that
- Excessive volatility refers to the fact that
- A phenomenon closely related to market overreaction is
- When a corporation announces a major decline in earnings, the stock price may initially decline significantly and then rise back to normal levels over the next few weeks. This impact is called ________.
- The January effect refers to the fact that
- The small-firm effect refers to the
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