History shows that, as inflation increases, price-earnings ratios increase along with inflation.

Question

Quizplus · Accepted Answer

This statement is false. Historical data suggests that as inflation increases, price-earnings ratios tend to decrease or at best remain unchanged. When inflation increases, it erodes the value of money and leads to higher costs for companies, which can negatively impact their earnings. This, in turn, can result in a decrease in price-earnings ratios.

History Shows That, as Inflation Increases, Price-Earnings Ratios Increase Along