Question

Why do you think a stock market, as indicated by various market indexes, can experience significant gains while unemployment stays high? Be sure to base your response on sound economic (macroeconomic and microeconomic) theory.

Answer 1

Yes it is true that various market indexes experience significant gains while there is unemployment stays high in the economy.

It happens because of the one major reason and that is major portion of the economic wealth of any country is in the hand of few investors on few businessman.

The investment policy of private sector is not based on the public welfare and rather it based on the maximization of profit in the economy and that’s why it is a situation of unemployment is always existing in the economy.

Hear the relevant macroeconomic policies are wealth accumulation and the theory of income and unemployment the concept of GDP and welfare and the macroeconomic policy is also applicable here.

The concept of microeconomics is proper and optimum utilisation of resources in the economy with proper demand and supply forces in all the sectors of the economy.