Final answer:
A well diversified portfolio will likely experience a decline if stock prices overall decline in a given month. Diversification reduces risk from individual stocks but not from market-wide downturns. A rise in the supply of money in financial markets typically leads to lower interest rates.
Step-by-step explanation:
If stock prices overall decline in a given month, a well diversified portfolio will likely experience a decline. Diversification can help offset some risks, but it does not guarantee protection against a market-wide decline. For example, in 2008, even well-diversified U.S. stock funds declined by 38%, showcasing that broad market trends can still significantly affect diversified portfolios. As concerns interest rates, a rise in supply of money in the financial markets typically leads to a decline in interest rates, while a rise in demand would lead to an increase in interest rates.