Suppose that increases in the money supply lead to a rise in stock prices. Should you go out and buy stocks? A. You should buy stocks because you can expect to earn more than the equilibrium return on stocks by acting on the money supply information. B. You should buy stocks because the increase in the money supply should increase stock prices. C. You should not buy stocks because the rise in the money supply is publicly available information that will be already incorporated into stock prices. D. You should not buy stocks because bonds are always a better investment than stocks.

Question

Charlee Keith

Business

31 August, 10:51

Suppose that increases in the money supply lead to a rise in stock prices. Should you go out and buy stocks? A. You should buy stocks because you can expect to earn more than the equilibrium return on stocks by acting on the money supply information. B. You should buy stocks because the increase in the money supply should increase stock prices. C. You should not buy stocks because the rise in the money supply is publicly available information that will be already incorporated into stock prices. D. You should not buy stocks because bonds are always a better investment than stocks.

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Walter Skinner · Answer 1

C. You should not buy stocks because the rise in the money supply is publicly available information that will be already incorporated into stock prices