Question: (A) Which scenario is better for long-term economic growth: (a) the stock market grows at 6% per year indefinitely, or (b) it quickly doubles, then falls back to its previous level, and finally returns to its long-term trend rate?
(B) Program trading was largely blamed for the unprecedented 22% decline in the Dow on Black Monday, October 19, 1987. As a result, curbs were instituted prohibiting that practice after the Dow had moved up or down a certain amount. In 2002, the market did not decline more than 5% on any given day, but the net reduction was about the same. Which drop was least harmful to the economy?