In July 2009, the S&P 500 index was at 1,000. a. What is the S&P 500 index?

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In July 2009, 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 July2009 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 $20 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 2009? Assuming a multiplier of two and a GDP of $18,000 billion, how much additional/ less GDP would you predict for next year if all of this was true?

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Principles Of Macroeconomics

ISBN: 9781292303826

13th Global Edition

Authors: Karl E. Case,Ray C. Fair , Sharon E. Oster

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