For markets to be in equilibrium,that is,for there to be no strong pressure for prices to depart from their current levels,
A)The expected rate of return must be equal to the required rate of return; that is, .
B)The past realized rate of return must be equal to the expected future rate of return; that is, .
C)The required rate of return must equal the past realized rate of return; that is, .
D)All three of the above statements must hold for equilibrium to exist; that is, .
E)None of these statements is correct.

Question

For markets to be in equilibrium,that is,for there to be no strong pressure for prices to depart from their current levels,
A)The expected rate of return must be equal to the required rate of return; that is, . 
B)The past realized rate of return must be equal to the expected future rate of return; that is, . 
C)The required rate of return must equal the past realized rate of return; that is, . 
D)All three of the above statements must hold for equilibrium to exist; that is, . 
E)None of these statements is correct.

Quizplus · Accepted Answer

The expected rate of return being equal to the required rate of return is a key condition for markets to be in equilibrium. It ensures that there is no excess demand or supply in the market, and that prices are stable at their current levels. The past realized rate of return and expected future rate of return may be factors that influence the expected rate of return, but they are not sufficient conditions for equilibrium to exist.

For Markets to Be in Equilibrium,that Is,for There to Be