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29
The Stock Market and the Economy
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2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
29
Chapter Outline
Stocks and Bonds Bonds Stocks Determining the Price of a Stock The Stock Market Since 1948 Stock Market Effects on the Economy The Crash of October 1987 The Boom of 19952000 Fed Policy and the Stock Market The Post-Boom Economy
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will be.
When the dividends are expected to be
paid.
The amount of risk involved.
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FIGURE 16.1 The S&P 500 Stock Price Index, 1948 I2005 II
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An increase in stock prices causes an increase in wealth, and consequently an increase in consumer spending. Investment is also affected by higher stock prices. With a higher stock price, a firm can raise more money per share to finance investment projects.
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FIGURE 16.5 Ratio of Federal Government Budget Surplus to GDP, 1995 I2002 III
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