Question

To raise wealth and stimulate private spending, suppose the central bank lowers interest rates, making stock market investment relatively attractive. which stock market index would you monitor to judge the effectiveness of the policy: the dow jones industrial average or the s&p 500?

Answer 1

The effectiveness of the policy might be best monitored using the S&P 500, because it draws from a broader set of companies. The Dow Jones Industrial Average is an index of 30 leading companies. While it reflects the overall health of the stock market, it does not provide enough information about small companies.