High interest rates induce hold- ers of stock certificates to sell those stocks and put funds in

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High interest rates induce hold- ers of stock certificates to sell those stocks and put funds in the credit market instead of the stock market. Low interest rates cause an opposite flow of funds. What, then, is the rela- tionship between interest rates and prices on the stock market? If you thought that interest rates were going to rise, would you expect stock prices to rise, fall, or stay the same? What effect will this have on interest rates? Why?

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Introductory Economics

ISBN: 386524

1st Edition

Authors: Michael Veseth

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