If investors become optimistic and expect that long-term earnings will increase, we would initially expect
A) the price of stocks to decrease.
B) the price of bonds to increase.
C) the price of stocks to increase.
D) the exchange rate to decrease.

Question

Quizplus · Accepted Answer

When investors are optimistic about future earnings, they are more likely to invest in stocks, driving up the demand and consequently the price of stocks. This optimism reflects the expectation of higher future profits, making stocks more attractive.

If Investors Become Optimistic and Expect That Long-Term Earnings Will