Monetary and fiscal policy may affect security prices through their impact on earnings.

Question

Quizplus · Accepted Answer

Both monetary and fiscal policy can influence economic growth and inflation, which in turn can affect the profitability of businesses and ultimately impact their stock prices. For example, if the government implements expansionary monetary policy by reducing interest rates, this can stimulate borrowing and spending, boosting corporate earnings and potentially leading to higher stock prices. Similarly, fiscal policy measures like tax cuts or infrastructure spending can increase aggregate demand and create a more favorable environment for companies, also affecting stock prices.

Monetary and Fiscal Policy May Affect Security Prices Through Their