If the general level of interest rates in the economy moves up, then investors will require a rate of return on securities, and, in general, stock prices should , ceteris paribus.
A)lower, decline
B)higher, increase
C)higher, decline
D)lower, increase

Question

Quizplus · Accepted Answer

If the general level of interest rates in the economy moves up, investors will require a higher rate of return on securities to compensate for the opportunity cost of other investments that now offer higher returns. This will make stocks less attractive and decrease their demand, leading to a decline in stock prices. Therefore, the correct choice is C: higher interest rates will lead to a decline in stock prices.

If the General Level of Interest Rates in the Economy