Timeline for Is it better for economic growth to invest in stocks or to purchase products?
Current License: CC BY-SA 3.0
5 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| May 8, 2016 at 20:53 | comment | added | Fix.B. | You are right that there is not necessarily a direct link between buying a stock and the entrepreneur having more money. In an IPO, you are paying the entrepreneur to buy a little bit of the firm, or you might be adding to the capital of the firm if its issuing shares. Firms do issue shares after their IPO, mostly through SEO's (seasoned equity offerings). But even if you buy somebody's stock you are increasing the pool of money that is devoted to buying stocks. Also, your purchase increases the price of equity, which makes it more profitable for entrepreneurs to make new firms and sell them. | |
| May 8, 2016 at 18:49 | comment | added | Fix.B. | Investment increases the future size of the economy because because the economy's output is produced with capital and labor. Investment increases the amount of capital the economy has to produce goods and services. | |
| May 8, 2016 at 5:48 | vote | accept | Economic | ||
| May 8, 2016 at 5:48 | |||||
| May 8, 2016 at 5:42 | comment | added | Economic | Thanks for the response. I still however have a few questions. In concerning your first claim, you said, "you are effectively giving money to an entrepreneur to build a firm". My understanding is limited, but I thought that companies do not have any interaction with their stocks besides their IPO. In this way I do not see how a company can use its stock to increase its wealth. Furthermore, can you elaborate on how "investment increases the future output of the economy". | |
| May 7, 2016 at 14:53 | history | answered | Fix.B. | CC BY-SA 3.0 |