Decline in interest rates in the economy
Microeconomics
Draw a supply/demand diagram to model the US stock market (use the value of a stock price index such as the S&P 500 to represent the overall level of stock prices.) Show the effect on stock prices of a decline in interest rates in the economy. (hint: from the view point of those with accumulated savings to invest, interest bearing financial assets such as money market funds and bank certificates of deposit are substitutes for stock market mutual funds….also, from the viewpoint of future corporate sales, lower interest rates mean that customers can more cheaply finance the purchase of goods)
