In a stock market boom ________.
A)autonomous consumption might increase because stock holders might feel richer and consume more
B)autonomous investment might increase because a higher stock value for a firm helps firms raise funds for increased investment
C)the IS curve might shift to the right
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

A) When stock prices rise, people who own stocks feel wealthy and tend to increase their consumption. This increases autonomous consumption.
B) When the stock price is high, firms can raise more funds by issuing new stocks. This increases autonomous investment.
C) Increase in autonomous consumption and investment leads to an increase in aggregate demand, which shifts the IS curve to the right. Hence, all of the above choices are correct.

In a Stock Market Boom ________