According to Tobin's q theory,when equity prices are high the market price of existing capital is ________ relative to new capital,so expenditure on fixed investment is ________.
A)cheap;low
B)dear;low
C)cheap;high
D)dear;high

Question

Quizplus · Accepted Answer

Tobin's q theory suggests that when equity prices are high, the market value of existing capital is high (dear) relative to the replacement cost of new capital, encouraging firms to invest more in fixed assets, leading to high expenditure on fixed investment.

According to Tobin's Q Theory,when Equity Prices Are High the Market