A Decrease in Interest Rates Can ________ the Demand for Stocks

question 170

Multiple Choice

A decrease in interest rates can ________ the demand for stocks as stocks become relatively ________ attractive investments as compared to bonds.

• A)increase; more
• B)decrease; less
• C)decrease; more
• D)increase; less
• E)increase; similar

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Definitions:

Price-Searcher Markets

Markets where sellers have some discretion over the price of their products due to a lack of perfect competition.

Price-Taker Markets

Markets where individual firms have no control over the price of their products, due to perfect competition and homogeneous products.

Economic Profits

The difference between a firm's total revenue and all costs, including both explicit and implicit costs, representing the excess over the opportunity cost.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute.