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Basic Question 1 of 3

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:

A. GDP itself.
B. the share of earnings in GDP.
C. the P/E ratio.

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I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt

Martin Rockenfeldt

Learning Outcome Statements

describe the relation between the long-run rate of stock market appreciation and the sustainable growth rate of the economy;

explain why potential GDP and its growth rate matter for equity and fixed income investors;

CFA® 2025 Level II Curriculum, Volume 1, Module 9.