Recent studies of the linkages between stock prices and inflation generally find a ____ relationship. The choice below that correctly fills in the blank in the preceding sentence is:
A) Positive
B) Negative
C) Spurious
D) Stable
E) None of the above

Question

Quizplus · Accepted Answer

Recent studies generally find a negative relationship between stock prices and inflation, meaning that as inflation increases, stock prices tend to decrease, and vice versa. This is because high inflation can erode the real returns on investments, leading investors to adjust their portfolios away from stocks.

Recent Studies of the Linkages Between Stock Prices and Inflation