Using a supply and demand framework, what is likely to happen to share prices in general if the central bank unexpectedly raises interest rates?

Question

Quizplus · Accepted Answer

When the central bank unexpectedly raises interest rates, the cost of borrowing money increases. This generally makes bonds and savings accounts more attractive compared to stocks, leading investors to demand fewer stocks. Hence, the demand curve for shares shifts to the left, likely causing share prices to fall. The supply curve is not directly affected by interest rate changes in this context.

Using a Supply and Demand Framework, What Is Likely to Happen