- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 9. Economic Growth
- Subject 2. Why does Potential Growth Matter to Investors?
CFA Practice Question
The percentage change in stock market value is the sum of the percentage change in GDP, the share of earnings in GDP and the P/E ratio. In the long run, which factor must dominate? The percentage change in:
B. the share of earnings in GDP.
C. the P/E ratio.
A. GDP itself.
B. the share of earnings in GDP.
C. the P/E ratio.
Correct Answer: A
The other two factors cannot rise or decline forever.
User Contributed Comments 0
You need to log in first to add your comment.