Stock Market Relationship To The Economy

Economic growth is an increase (or decrease) in the value of goods and services that a geographic area produces and sells compared to an earlier time. If the value of an area's goods and services is higher in one year than the year before, it experiences positive growth, usually simply called "economic growth." In a year when less value than the year before is produced and sold, it experiences "negative economic growth," also called "recession" or "depression.Economic growth is measured as a percentage change in the Gross Domestic Product (GDP) or Gross National Product (GNP). These two measures, which are calculated slightly differently, total the amounts paid for the goods and services that a country produced. As an example of measuring economic growth, a country which creates $9,000,000,000 in goods and services in 2010 and then creates $9,090,000,000 in 2011, has an economic growth rate of 1% for 2011.

A progressing economy is one in which more goods are being produced over time. It is real "stuff," not money per se, which represents real wealth. The more cars, refrigerators, food, clothes, medicines, and hammocks we have, the better off our lives. We saw above that, if goods are produced at a faster rate than money, prices will fall. With a constant supply of money, wages would remain the same while prices fell, because the supply of goods would increase while the supply of workers would not. But even when prices rise due to money being created faster than goods, prices still fall in real terms, because wages rise faster than prices. In either scenario, if productivity and output are increasing, goods get cheaper in real terms.Understanding the basic processes of the stock tips will help you master the art of international stock market.

Generally speaking, the stock market will reflect the economic conditions of an economy. If an economy is growing then output will be increasing and most firms should be experiencing increased profitability. This higher profit makes the company shares more attractive – they can give bigger dividends to shareholders. In some situations you can argue that the stock market can actually affect the economy. The best case would perhaps be the Wall Street Crash of 1929-32. This rapid decline in the stock markets severly affected business and consumer confidence. It also caused banks to lose money. This crash was undoubtedly a factor in contributing to the length and severity of the Great Depression. Having said that, it is also worth pointing out that the stock market crash was due to the prospect of recession. In a way the falling stock market and depression were closely linked.