Question

What happens to the following aspects of GDP when there is a stock market boom?

Personal consumption expenditures
Investment
Net Exports
Government expenditure

Answer 1

The stock market boom increase the money holdings of the people so they demand more goods and services. This will be rise in the personal consumption expenditure, so as the investment. When the personal people have more money hand they obviously increase their investment , they will stocks and bonds or invest in physical assets such as land, machinery, buildings.

The stock market boom will negatively affect the balance of payment of the country, people will import more goods and services from foreign nations so the net exports will deteriorate. The net exports is export minus imports. So the net exports will decrease.

The government government expenditure will be unaffected in this case, the government spending is a discretion of the government. .