Question

The Stock Market and the Economy Summary

Write a summary of the following:

Choose 4 financial markets or institutions. Briefly explain what each specializes in (mortgages, stocks, government securities, etc.).

Compare how each financial market you identified influences the US economy and global economy.

Answer 1

1. 4 financial market would be-

Dow Jones Industrial Average which is specialised in trading of the energy stock and other popular companies of the United States economy.

Nasdaq is a technology oriented stock and it is a value weighted index and this will be reflecting the representation of various stocks which are leaders of technology in the United States.

Standard and Poor 500 index will be a value weighted index as a representative of various stocks in the economy and it will be complete reflection of United States economy at it is a representative of 500 stocks

Federal reserve is a monetary institution which is a Central Bank of United States and it is used to regulate the banking sector in the economy and formulate the monetary policy accordingly.

Movement of United States stock indexes like Dow Jones Industrial Average along with Nasdaq and Standard and Poor 500 would be having a majority of impact on the global indices because these are known as the mother indexes and they are affecting the movement of the entire global economy so when the United States stock index will be moving upward the most global index will be following the United States.

Federal Reserve policies are often replicated by other developed economy because these are reflective of optimum control measure which are taken in order to stabilize the United States economy.