Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 9 The Real Economy in the Long Run
Chapter 26 of 36 – Saving, Investment, and the Financial System
Section 6 of 25
…
After a corporation initially issues stock by selling shares to the public these shares trade on stock exchanges.
In these stock exchange transactions of its shares the corporation itself receives no money.
The most important stock exchanges in the U.S. economy are
· the New York Stock Exchange
· the American Stock Exchange
· NASDAQ, National Association of Securities Dealers Automated Quotation system
Most countries have their own stock exchanges on which the shares of local corporations trade.
…
The prices at which shares trade on stock exchanges are determined by the supply of and demand for the stock.
Because stock represents ownership in a corporation the demand for a stock and thus its price reflects public perception of the corporation's future profitability.
When people become optimistic about a company's future they expect the company to have increasing profits.
They increase their demand for its stock, thereby the price of a stock share rises.
When people become pessimistic about a company's future they expect the company to have decreasing profit or even losses.
They decrease their demand for its stock, thereby the price of a stock share falls.
…
Various stock indexes monitor the overall level of stock prices.
A stock index is an average of a group of stock prices.
The most famous stock index is the Dow Jones Industrial Average which has been computed since 1896.
It is computed using the prices of the stocks of thirty major U.S. corporations.
These are not the thirty largest corporations but rather a sample selected across various industries, the selected thirty change over time.
Because stock prices reflect expected future profitability stock indexes are considered good indicators and predictors of future general economic conditions.
…
future economic conditions
shōrai no keizai jōken
将来の経済条件

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