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S E34: The Boom and Bust of Business Cycles

Think Like An Economist

CHAPTER

The Stock Market Is a Vote of Confidence

Rising inflation indicates the economy might be producing above its potential. Falling in reflation suggests that we're not using all our resources. The employment cost index tells us how expensive workers are getting, and otherwords, how fast wages and benefits are rising. A strong stock market suggests traders are optimistic about how much profits businesses are going to make in the future. But be careful, because the stock market can be a bit flighty.

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