P/E ratios tend to be ________ when inflation is ________.

Name: P/E ratios tend to be ________ when inflation is ________.
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Question

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Inflation lowers the purchasing power of money, which in turn affects the rate at which a company's future earnings are discounted. As a result, when inflation is higher, investors demand a higher return for holding onto a stock, causing P/E ratios to be higher. Therefore, P/E ratios tend to be higher when inflation is lower.

P/E Ratios Tend to Be ________ When Inflation Is ________

P/E Ratios Tend to Be When Inflation Is