Question

What effect might a fall in stock prices have on business investment?

Short answer

When theprice of a company's stock goes down, it raises less money and therefore less investment in plants and equipment.

Step-by-step solution

Step. 1 Introduction

An investment is an asset or item purchased for the purpose of generating an increase in income or capital. The importance of an investment is primarily to earn additional sources of income or to make a profit from the investment over a period of time.

Step. 2 Explanation

Stock price is the price of shares of a company issued by the public ownership. Higher the stock price higher will be the reputation of the industry in the market and vice-versa. When the stock prices are high industry will receive high investment.