Because of globalization and the amount of international trade that takes place today, a large slide in China's stock market, as was exhibited last week, can indicate that the market for our exports and imports is weakening. This will cause fewer exports for us, and higher prices for our imports. Less exporting can cause businesses domestically to slow, and thus cause our economy as a whole to slow as well. Thus, a slowing economy causes investors to be skittish, and they sell some of their stocks in order to take some of their gains out of the market. In turn, as selling increases, the price of the stock falls. When this occurs on a wide scale, we see a slide in our stock market, just like last week.
2007-03-07 06:28:36
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answer #1
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answered by theeconomicsguy 5
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