Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 9, Problem 6CQQ
To determine
Concept based on
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Which of the following is NOT axioms of utility?
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Analyze reasons why good news for the economy (long term) isn’t always good news for stock and other financial markets (short term).
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Chapter 9 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
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- Discuss the core principles of the Efficient Market Hypothesis. Explain one argument that may indicate why the stock market may not efficient.arrow_forwardAccording to the efficient markets hypothesis,a. excessive diversification can reduce an investor’sexpected portfolio returns.b. changes in stock prices are impossible to predictfrom public information.c. actively managed mutual funds should generatehigher returns than index funds.d. the stock market moves based on the changinganimal spirits of investorsarrow_forwardMr. John Dela Cruz, wanted to start investing in the stock market, which of the following financial intermediaries can help him? *A. BanksB. Pension Fund CompaniesC. Brokerage FirmsD. Insurance CompaniesE. Cooperativesarrow_forward
- Explain the implication of conservatism considering that majority of investors are emotional.arrow_forwardAccording to the efficient markets hypothesis,a. changes in stock prices are impossible to predict from publicinformation.b. excessive diversification can reduce an investor's expected portfolioreturns.c. the stock market moves based on the changing animal spirits ofinvestors.d. actively managed mutual funds should give higher returns than indexfunds.arrow_forwardThe relationship between a bond and its price is easier to determine than the relationship between a stock and its price.True or Falsearrow_forward
- What happens to interest rates in the market if the stock brokerage commission declines? Explain the reason for your answer!arrow_forwardWhich type of financial intermediary provides individual investors with professional management of their money and diversification in order to limit the risk of investing? A. mutual funds B. insurance companies C. hedge funds D. investment banksarrow_forwardwhy do stock prices constantly change? Doesn’t this go against the law of supply and demand?arrow_forward
- Which of the below statements DOES NOT FIT IN with "Financial Markets," Group of answer choices Flawed financial decisions can occur because we place excessive weight on past trends to predict the future. Making financial decisions based on emotions can result in bad financial decisions. Wheelan prescribes brain injury as a reliable investment strategy. We can make poor financial decisions because we are prone to herd-like behavior.arrow_forwardEconomists assert that financial markets serve the function of efficiently allocating capital. What is meant by the function? Explain and include an example.arrow_forwardWhich of the following would count as valid evidence against the efficient markets hypothesis? (a) Some investors make huge profits betting on specific stocks on the stock market. (b) Financial crises still occur. (c) Stock prices always rise two days after good news is released. (d) Stock prices are very volatile. (e) A company’s stock price does not always rise with good news about that company.arrow_forward
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