Which of the Following Is a Correct Reason Why a Decrease

question 73

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.

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Definitions:

Savings

Money set aside for future use that is not currently spent on consumption or expenses.

Correlation Coefficient

A metric that determines the intensity and orientation of a linear connection between two variables.

T Test

A statistical test used to determine if there is a significant difference between the means of two groups which may be related in certain features.