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Chapter 1: Q.2 (page 66)

What effect might a fall in stock prices have on business investment?

Short Answer

Expert verified

When theprice of a company's stock goes down, it raises less money and therefore less investment in plants and equipment.

Step by step solution

01

Step. 1 Introduction

An investment is an asset or item purchased for the purpose of generating an increase in income or capital. The importance of an investment is primarily to earn additional sources of income or to make a profit from the investment over a period of time.

02

Step. 2 Explanation

Stock price is the price of shares of a company issued by the public ownership. Higher the stock price higher will be the reputation of the industry in the market and vice-versa. When the stock prices are high industry will receive high investment.

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Most popular questions from this chapter

How would a fall in the value of the pound sterling affect British consumers?

What is the typical relationship among interest rates on three-month Treasury bills, long-term Treasury bonds, and Baa corporate bonds?

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b. the inflation rate?

c. interest rates?

How can changes in foreign exchange rates affect the profitability of financial institutions?

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