Which of the following tend to increase security market prices?
I. an increase in industrial production
II. an increase in corporate profits
III. an increase in the federal deficit when the economy is strong
IV. an increase in interest rates
A) I and II only
B) II and III only
C) I, II and III only
D) I, II, III and IV

Question

Quizplus · Accepted Answer

An increase in industrial production and an increase in corporate profits tend to increase security market prices, as they indicate economic growth and higher potential returns for investors. However, an increase in the federal deficit when the economy is strong may lead to higher interest rates and inflation, which can decrease the value of securities. Similarly, an increase in interest rates makes borrowing more expensive and can decrease corporate profits, leading to lower security prices. Therefore, options III and IV are incorrect.

Which of the Following Tend to Increase Security Market Prices