If central bankers raise the interest rate, the asset-price channel of monetary policy implies:

Question

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The asset-price channel of monetary policy suggests that changes in interest rates affect the prices of financial assets, including stocks. When interest rates rise, the cost of borrowing money increases, which can lead to lower stock prices as firms may experience decreased profits due to higher borrowing costs. Therefore, if central bankers increase the interest rate, stock prices will decrease.

If Central Bankers Raise the Interest Rate, the Asset-Price Channel