Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 21: Q 1. (page 566)

“When the stock market rises, investment spending is increasing.” Is this statement true, false, or uncertain? Explain your answer.

Short Answer

Expert verified

The statement is false.

Step by step solution

01

Introduction

Stock market is a representative of shares, which are components of company's capital & shareholders are the owners of the company.

02

Explanation 

Increase in stock market means the value of shares is increasing due to companies' financial success, and this is leading to increase in wealth of shareholders.

So in this case, increase in stock market just implies increase in the current value of investment & not increase in investment spending rather.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Go to http://www.eurmacro.unisg.ch/Tutor/islm.html. Set the policy instruments to G = 80, t = 0.20, c = 0.75, and b = 40. Now increase the sensitivity of investment

to the interest rate, b, from 40 to 80. What happens to the slope of the IS curve? Why

During and in the aftermath of the financial crisis of 2007–2009, planned investment fell substantially despite significant decreases in the real interest rate.

What factors related to the planned investment function could explain this?

If firms suddenly become more optimistic about the profitability of investment and planned investment spending rises by \(100 billion, while consumers become

more pessimistic and autonomous consumer spending falls by \)100 billion, what happens to aggregate output?

If an increase in autonomous consumer expenditure is matched by an equal increase in taxes, will aggregate output rise or fall?

When the Federal Reserve reduces its policy interest rate, how, if at all, is the IS curve affected? Briefly explain.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free