Final answer:
Economic events such as falling interest rates, falling capital gains tax rates, and rising employment rates generally have a positive impact on common stock prices, while rising inflation can have negative effects.
Step-by-step explanation:
The question asks which of the following economic events would have a positive long-term impact on common stock prices: Falling interest rates, Falling capital gains tax rates, Rising employment rates, and Rising inflation rates.
The correct answer is C, which includes I (Falling interest rates), II (Falling capital gains tax rates), and III (Rising employment rates), but not IV (Rising inflation rates).
Falling interest rates generally make stocks more attractive as investments compared to bonds, leading to higher stock prices. In addition, when capital gains tax rates fall, the effective return on investment in stocks goes up, also encouraging higher stock prices.
Rising employment rates stimulate economic growth and boost consumer spending, which often leads to increased corporate earnings and, subsequently, higher stock prices. However, Rising inflation rates can have mixed effects, often leading to higher costs for companies and possibly reducing earnings, which could negatively impact stock prices.