A boom in the stock market affects the economy because
A) firms invest more as demand grows.
B) consumers consume more as stock prices increase.
C) wealth of consumers grows as stock prices increase.
D) all of the above

Question

Quizplus · Accepted Answer

A boom in the stock market positively impacts the economy in multiple ways: firms are likely to invest more as they can raise capital more easily and anticipate higher demand; consumers may spend more as they feel wealthier due to increased stock prices, a phenomenon known as the wealth effect; and overall, the increase in stock prices directly increases the wealth of consumers who own stocks, further contributing to economic growth.

A Boom in the Stock Market Affects the Economy Because