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Unformatted text preview: xpectations, exports and
imports, personal income, and the money
supply. For example, increases in consumer credit are expected to push up the
Dow, the thought being that when consumer credit rises, people will buy more
goods and services, which is good for the
companies that sell goods and services.
When consumer credit falls, the reverse
happens. 16 (428-459) EMC Chap 16 EXHIBIT 11/18/05 16-2 9:33 AM Page 433 Dow
Dow Jones Industrial Average: 1928 – June 2005*
Industrial Average: 1928 June 2005 12,000
5,000 When would
have been a good
time to have purchased shares in
making up the
DJIA? When would
have been a good
time to sell?
(There’s more than
one answer to
each question.) 4,000
13 0 Year
*Annual data to 1946, monthly thereafter. QUESTION: I own a few stocks as a result of some gifts I received from my grandparents. None are included in the Dow
Jones Industrial Average. Does it affect
me when the Dow goes up or down, even
if I do not own any of the stocks that
make up the DJIA?
ANSWER: It doesn’t affect you if we are
looking at daily changes, but if we are
talking about a long decline or a long rise
in the DJIA, then it indirectly affects you.
Many economists say that what happens
in the stock market—or to the DJIA—is
a sign of future economic events. In other
words, if the DJIA goes down over time,
it indicates that the economic future is
somewhat depressed; if it goes up over
time, it indicates that the economic
future looks good. The economic future,
good or bad, is something that does affect
you. It affects prices you pay, how easy or
hard it is to get a job, how large or small
a raise in income you get, and so on. How the Stock Market
Suppose a company wants to raise money
so that it can invest in a new product or a
new manufacturing technique. It can do one
of three t...
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This document was uploaded on 01/16/2014.
- Winter '14