In July 2003, the S&P 500 index was at 1,000.

a. What is the S&P 500 index?

b. Where is the S&P today?

c. If you had invested $10,000 in July 2003 and your investments had increased in value by the same percentage as the S&P 500 index had increased, how much would you have today?

d. Assume that the total stock market holdings of the household sector were about $12 trillion and that the entire stock market went up/down by the same percentage as the S&P.

Evidence suggests that the “wealth effect” of stock market holdings on consumer spending is about 4 percent of wealth annually. How much additional or reduced spending would you expect to see as a result of the stock market moves since July 2003? Assuming a multiplier of 2 and a GDP of

$10,000 billion, how much additional/less GDP would you predict for next year if all of this was true?