A change in inflationary expectations resulting from events such as international trade embargoes or major changes in Federal Reserve policy will result in a shift in the SML.

Question

Quizplus · Accepted Answer

Expectations of inflation can affect the expected return on investments, which in turn affects the demand for and supply of those investments. This leads to a shift in the Security Market Line (SML).

A Change in Inflationary Expectations Resulting from Events Such as International