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GROWTH IN STOCK MARKET
DOES NOT INDICATE GROWTH OFAN ECONOMY
BBb
MADE BY:-
SONAM SETH
SONAL BAJAJ
AKANSHA DHINGRAPRACHI ARORA
FF3
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STOCK MARKET
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What is a stock market?
A stock market, or equity market, is a private or
public market for the trading of company stock and
derivatives at an agreed price; these are securities
listed on a stock exchange as well as those onlytraded privately.
The size of the world stock market is estimated at
ab
out $36.6 trill
ion US at theb
eginning of Octob
er2008.
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The total world derivatives market has been
estimated at about $791 trillion face or nominal
value, 11 times the size of the entire world economy.
The stocks are listed and traded on stock exchanges
which are entities a corporation or mutual
organization specialized in the business of bringing
b
uyers and sell
ers of the organizations to al
isting ofstocks and securities together.
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Functions of Stock Market
Connecting those who seek money with those whocan provide it.
Create an auction mechanism in which prices can be
decided for investments. Distributing the future risk of investments across
many millions of individuals.
Providing the claim tickets upon which future wealth
can be staked.
Connecting financial institutions together to createmoney.
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ECONOMIC GROWTH
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What is Economic Growth
Economic growth is the increase in the amount of the
goods and services produced by an economy over
time.
It is conventionally measured as the percent rate of
increase in real gross domestic product, or real GDP.
Growth is usually calculated in real terms, i.e.
inflation-adjusted terms, in order to net out theeffect of inflation on the price of the goods and
services produced.
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In economics, "economic growth" or "economic growththeory" typically refers to growth of potentialoutput, i.e., production at "full employment," which is
causedb
y growth in aggregate demand orobserved output.
Economic growth is generally distinguished fromdevelopment economics. The former is primarily the
study of how countries can advance their economies.The latter is the study of the economic aspects of thedevelopment process in low-income countries.
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ECONOMIC GROWTH INDICATORS
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Economic Growth Indicators
An economic indicator (or business indicator) is a statisticabout the economy. Economic indicators allow analysisof economic performance and predictions of futureperformance.
Economic indicators include various indices, earningsreports, and economic summaries, such asunemployment, housing starts, Consumer Price Index (ameasure for inflation), industrial production,
bankruptcies, Gross Domestic Product, broadbandinternet penetration, retail sales, stock market prices,and money supply changes
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1) GDP (Gross Domestic Product):
It is the monetary value of all the finished goods and services producedwithin a country's borders in a specific time period, though GDP is usuallycalculated on an annualbasis. It includes all of private and
public consumption, government outlays, investments and exports lessimports that occur within a defined territory.
GDP = C + G + I + NX
where:
"C" is equal to all private consumption, or consumer spending, in a nation'seconomy"G" is the sum of government spending"I" is the sum of all the country's businesses spending on capital"NX" is the nation's total net exports, calculated as total exports minus totalimports. (NX = Exports - Imports)
GDP is commonly used as an indicator of the economic health of a country,as well as to gauge a country's standard of living.
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2) Consumer Price Index:
It is a measure that examines the weightedaverage of prices of a basket of consumer goods andservices, such as transportation, food and medical care. TheCPI is calculated by taking price changes for each item in the
predeterminedb
asket of goods and averaging them; thegoods are weighted according to their importance. Changesin CPI are used to assess price changes associated with thecost of living.
Sometimes referred to as "headline inflation".
3) Industrial Production Index:
It is an economic indicator that is releasedmonthly by the Federal Reserve Board. The indicator measuresthe amount of output from the manufacturing, mining, electric
and gas industries.
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4) Retail Price Index:
An index that gathers the prices of several retail goods in outlets across the
United States in order to give an indication of the rate of inflation.
5) Stock Market:
A stock market, or equity market, is a private or public market for the
trading of company stock and derivatives at an agreed price; these are securities
listed on a stock exchange as well as those only traded privately.
6) Bankruptcy:
Bankruptcy is a legally declared inability or impairment of ability of an
individual or organization to pay its creditors.
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7) Unemployment:
Unemployment occurs when a person is available to work and
currently seeking work, but the person is without work . The
prevalence of unemployment is usually measured using the
unemployment rate, which is defined as the percentage of those
in the labor force who are unemployed.
8) Interest Rate:
Interest rate prevalent in a country gives an approximate
indication of the expected/required rate of return by that country
in the coming near future.
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Reasons for Economic Growth Fall
Bad lending policies resulting in low interest rates, highliquidity and low volatility, which led financial institutions tounderestimate risks, a breakdown of credit and riskmanagement practices in many financial institutions, and
shortcomings in financialregu
lation and supervision.
This environment both fueled a U.S. housing boom andencouraged banks and other institutions to take on excessiveleverage to generate high returns.
Financial institutions weakened their lending standards andtook on excessive risk.
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Analysis of economic indicators
for INDIA
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INDIA
Stock market index values over the past few years
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GDP growth rate for the past few years
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Other Key Indicators (Jan09)
Interest Rate 5%
Inflation 3.5%
Unemployment 7%
Industrial Production -0.5
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