Explain how a stock market crash has the potential to lead to a recession in an economy
What will be an ideal response?
A stock market crash is essentially a substantial decrease in the average price of stocks. Stocks are a part of real wealth. A stock market crash decreases the value of stocks which decreases real wealth. Real wealth is an important determinant of consumption spending. If real wealth declines, so does consumption spending. Therefore, a stock market crash will result in a decline in consumer expenditures. This will result in a decline in GDP. If the decrease in GDP is substantial enough, this can lead to a recession.
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The circular flow shows that aggregate spending is larger than aggregate income because people save
Indicate whether the statement is true or false
If you based your estimate on how long it took poor regions of the United States to catch up to the per capita incomes of the rest of the nation, how long do you believe it would take Eastern Europe to obtain per capita incomes comparable to those of Western Europe?
a. About one year. b. About five to ten years. c. About twenty five years. d. Several generations.
Recall the Application about the government of Mexico City repainting highway lane lines to transform a 4-lane highway into a 6-lane highway to answer the following question(s).When computing percentage changes, using the simple approach results in increases and decreases which are:
A. identical. B. symmetric. C. not symmetric. D. more accurate than using the midpoint method.
A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket
A) equaled $160 in 1996. B) equaled $160 in 1983. C) rose 160% from the cost of the market basket in the base year. D) rose 60% from the cost of the market basket in the base year.