Stock market and economic growth essay

Were there no inflation, costs would more closely equal revenues, even if their recognition were delayed. The economy was booming, and it showed no sign of slowing down in Compute the cost of new issue of equity shares.

stock market essay

Overall Description 2 2. What other financial measures can you cite that are consistent with the stock price performance? But for most dollars received by foreign exporters, foreign central banks create additional local currency in order to maintain exchange rates. This amount of money is more than the cost of all goods and services in the entire world economy.

Gdp and stock market relationship

The same applies to reduced tax rates. Obviously, then, a growing economy consists of prices falling, not rising. The answer is yes and no. Even borrowing for long-term consumer consumption, such as for housing or automobiles, is a minority of total borrowing from banks. In fact, the only real force that ultimately makes the stock market or any market rise and, to a large extent, fall over the longer term is simply changes in the quantity of money and the volume of spending in the economy. In summary, credit expansion increases the spreads between revenue and costs, increasing profit margins. The resulting stress from this shift in responsibility from the broker to the individual is not always obvious, but almost certainly inevitable. Therefore, following monetary indicators would be the best insight into future stock prices and GDP growth. The same price formula noted above can equally be applied to asset prices — stocks, bonds, commodities, houses, oil, fine art, etc. This is not to say that a link does not exist between the money that companies earn and their value on the stock exchange in our inflationary world today, but that the parameters of that link — valuation relationships such as earnings ratios and stock-market capitalization as a percent of GDP — are rather flexible, and as we will see below, change over time. The market value is determined by the market capitalization in the stock market.

The research process for my report was no easy task.

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How the Stock Market and Economy Really Work