Some researchers argue that because corporate contracts and balance sheets are in nominal terms, rising inflation reduces corporate profitability, causing stock prices to rise.

Question

Quizplus · Accepted Answer

Rising inflation typically increases costs for companies, which can reduce corporate profitability. However, this reduction in profitability often leads to a decrease, not an increase, in stock prices as investors anticipate lower future earnings.

Some Researchers Argue That Because Corporate Contracts and Balance Sheets