An increase in uncertainty for the economy will ________.
A) increase stock prices due to a higher required return
B) not affect stock prices
C) increase stock prices due to a lower required return
D) depress stock prices due to a higher required return

Question

Quizplus · Accepted Answer

An increase in uncertainty for the economy will depress stock prices due to a higher required return. When there is greater uncertainty, investors will require a higher return in order to compensate for the additional risk. As a result, they will sell their shares or demand a lower price for purchasing shares, causing stock prices to decrease.

An Increase in Uncertainty for the Economy Will ________