Which of the following actions might we logically expect to result from rising stock prices?
A)Jim increases his consumption spending.
B)Firms sell fewer shares of new stock.
C)Firms spend less on investment.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Rising stock prices would typically result in an increase in household wealth, which could potentially increase consumption spending as individuals feel more financially secure. Firms, on the other hand, may be more inclined to sell more shares of new stock if their stock price is high, as this would allow them to raise more money. They may also be more likely to spend more on investment if their stock price reflects positive market sentiment about the company's prospects. Therefore, we can eliminate B and C as potential answers.

Which of the Following Actions Might We Logically Expect to Result