Over the 10-year period from 1997-2005, real interest rates fell gradually. Given this information, theory suggests that stock prices would rise over that period, all else equal.

Question

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According to the theory, when real interest rates fall, it becomes cheaper to borrow money, which leads to increased investment and economic growth. This in turn drives stock prices higher, as companies become more profitable and investors have more money to invest in stocks.

Over the 10-Year Period from 1997-2005, Real Interest Rates Fell