Question #5
Reading: Reading 6 Economic Growth
PDF File: Reading 6 Economic Growth.pdf
Page: 4
Status: Unattempted
Correct Answer: A
Question
Which of the following is least likely to affect the rate of appreciation of the aggregate stock market?
Answer Choices:
A. Growth rate in potential GDP
B. Reinvestment of dividends
C. Growth in Price earnings multiples
Explanation
The appreciation of aggregate stock market depends on GDP growth rate, growth of share
of capital in GDP and growth in P/E multiples. In the long run, stock market appreciation
depends only on GDP growth rate as the other two factors cannot increase (or decrease)
in perpetuity.