Stock Analysts Often Argue That Lower Interest Rates Are Good

question 178

Multiple Choice

Stock analysts often argue that lower interest rates are good for the stock market. Does this argument make sense?

• A) No; lower interest rates will tend to slow down the economy and this will be bad for the stock market.
• B) Yes; the lower rates of interest will increase the value of future income (and capital gains) and stock prices will rise to reflect this factor.
• C) No; the lower rates of interest will reduce the value of future income (and capital gains) and this will cause stock prices to fall.
• D) Yes; the lower interest rates will cause inflation and inflation is generally good for the stock market.

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Definitions:

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