An unexpected fall in Capacity Utilization should send bond prices __________ and stock prices __________.
A) up; up
B) up; down
C) down; up
D) down; down

Question

Quizplus · Accepted Answer

An unexpected fall in Capacity Utilization indicates an economy is not operating at its full potential, which can lead to lower interest rates as a policy response to stimulate the economy. Lower interest rates typically increase bond prices due to their inverse relationship. However, this economic signal can be negative for stocks as it suggests weaker economic activity and potentially lower corporate profits, leading to a decrease in stock prices.

An Unexpected Fall in Capacity Utilization Should Send Bond Prices