________ in interest rates are associated with stock market declines.
A) Anticipated increases
B) Unanticipated increases
C) Anticipated decreases
D) Unanticipated decreases

Question

Quizplus · Accepted Answer

Unanticipated increases in interest rates are associated with stock market declines. This is because when interest rates unexpectedly rise, it becomes more expensive for companies to borrow money to invest in their businesses, which in turn can lead to lower stock prices. Anticipated increases in interest rates, on the other hand, may already be priced into the stock market and therefore have less of an impact. Anticipated decreases in interest rates tend to have the opposite effect, as they can stimulate economic growth and lead to higher stock prices. Unanticipated decreases in interest rates may also have a positive impact on the stock market, but to a lesser extent than anticipated decreases.

________ in Interest Rates Are Associated with Stock Market Declines