Multiple Choice
Which of the following is a correct reason why a decrease in the money supply will tend to cause stock prices to fall?
A) A decrease in the money supply will cause interest rates to rise, thereby shifting funds from financial to real investments.
B) A decrease in the money supply will cause interest rates to fall, thereby shifting funds from financial to real investments.
C) A decrease in the money supply will result in higher corporate profits in real terms.
D) A decrease in the money supply will cause interest rates to rise, thereby making bonds more attractive investments than stocks.
Correct Answer:
Verified
Correct Answer:
Verified
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