According to Tobin's q,
A)when the stock market is high,firms do not change their investment.
B)when the stock market is low,firms increase their investment.
C)when the stock market is high,firms increase their investment.
D)firms' decisions on investment do not depend on the stock market.

Question

Quizplus · Accepted Answer

Tobin's q suggests that when the market value of a firm is higher than the replacement cost of its assets (i.e., when the stock market is high), firms are more likely to invest in new capital because the market is valuing their assets more than their cost, indicating profitable investment opportunities.

According to Tobin's Q