Monetary policy affects securities prices by
1. affecting investors' required return
2. increasing the federal deficit
3. affecting firms' capacity to generate earnings
A)1 and 2
B)1 and 3
C)2 and 3
D)all of the above

Question

Quizplus · Accepted Answer

Monetary policy influences securities prices primarily by affecting investors' required returns and firms' capacity to generate earnings. It does this through interest rate adjustments, which can alter the cost of borrowing and impact economic activity, thereby influencing earnings and investment returns. Increasing the federal deficit is more directly related to fiscal policy rather than monetary policy.

Monetary Policy Affects Securities Prices by