Question

What was the impact of falling shares of the Wall Street Exchange of USA?

Answer 1

The U.S. is the world’s biggest economy, with 2013 gross domestic product (GDP) of $16.80 trillion, comprising 22.4% of global economic output. It is almost twice the size of the second-biggest economy, China (2013 GDP = $9.24 trillion). In terms of market capitalization, the U.S. is the world’s biggest by some distance, with a market value of $23.6 trillion dollars (as of September 23, 2014) that comprises 36.3% of global market capitalization. Japan’s $4.6-trillion market is a distant second, with just over 7% of global market cap.

Wall Street has such a significant impact on the economy because it is the trading hub of the biggest financial markets in the world’s richest nation. Wall Street is home to the venerable New York Stock Exchange (now called NYSE Euronext), which is the undisputed leader worldwide in terms of average daily share trading volume and total market capitalization of its listed companies. Nasdaq OMX, the second-largest exchange globally, also has its headquarters on Wall Street. Street firms together control trillions of dollars in financial assets, while New York is the second-largest trading center in the foreign exchange market, where daily trading volumes exceed $5 trillion.

How does Wall Street have an impact?

1. Wall Street affects the U.S. economy in a number of ways, the most important of which are –

2. Wealth Effect: Buoyant stock markets induce a “wealth effect” in consumers, although some prominent economists assert that this is more pronounced during a real estate boom than it is during an equity bull market. But it does seem logical that consumers may be more inclined to splurge on big-ticket items when stock markets are hot and their portfolios have racked up sizeable gains.

3. Consumer Confidence: Bull markets generally exist when economic conditions are conducive to growth and consumers and businesses are confident about the outlook for the future. When their confidence is riding high, consumers tend to spend more, which boosts the U.S. economy since consumer spending accounts for an estimated 70% of it.
Business investment: During bull markets, companies can use their pricey stock to raise capital, which can then be deployed to acquire assets or competitors. Increased business investment leads to higher economic output and generates more employment.

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Answer 2

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