Question

1) The efficient market hypothesis states that:

• markets currently contain an efficient amount of information for them to clear.

• in order for markets to be efficient they need to be adequately regulated.

• when buyers and sellers act in their own best interest markets will be efficient.

• markets currently contain all available information and correctly value instruments.

2) An increase in the expected future price of inputs will cause:

• the long-run aggregate supply curve to shift to the left.

• the short-run aggregate supply curve to shift to the left.

• the aggregate demand curve to shift to the right.

• a movement rightward along the short-run aggregate supply curve.

3) A saver can eliminate _______ risk through ________________.

• idiosyncratic; diversification

• idiosyncratic; asset valuation

• systemic; asset valuation

• systemic; diversification

4) Which of the following would cause the money demand curve to shift to the left?

• An increase in GDP

• A technological advance, like online shopping

• An increase in interest rates

• Inflation

Answer 1

1) The Efficient Market Hypothesis states that markets currently contain all available information and correctly value instruments.

2) An increase in the expected future price of inputs will cause the short run aggregate supply curve to shift  to the left.

3) A saver can eliminate idiosyncratic risk through diversification. An idiosyncratic risk is a type of risk that affects only a smaller number of assets and it can be reduced through diversification.

4) Inflation will cause the money demand curve to shift to the left. A shift of the demand curve to the left means a demand drop.