ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The stock market is an indicator of sentiment in an economy that can have an impact on gross domestic product (GDP). When the stock market is doing well and growing, it indicates that companies are doing well and will continue to do so.

Detailed explanation-2: -It cannot cause the economy to grow or decline. It is one leading indicator of the economy, so when the stock market goes up it does signal that many people think the economy will grow in the near future. Sometimes they are right, and sometimes they are wrong.

Detailed explanation-3: -There definitely is a relationship between the two. Official updates on the state of the economy, such as inflation and employment figures, have a big impact on share prices. And the movement of the stock market itself can affect how much people spend and how much companies invest.

Detailed explanation-4: -The Stock Market As an Indicator Because stock prices factor in forward-looking performance, the market can indicate the economy’s direction, if earnings estimates are accurate. A strong market may suggest that earnings estimates are up, which may suggest overall economic activity is up.