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Referring to the chart:

enter image description here

What do the units represent? Is it directly related to GNP?

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    Without defending protectionism... the implication of the chart seems to be that Smoot-Hawley Act caused the drop in prices, but, since the time of the chart is the time of the Wall Street Crash of 1929 and the start of the Great Depression, the correlation could be very weak (unless they say that Smooth-Hawley caused the crash, which would be extreme). For example, it ignores the beginning of the New Deal and other measures against the recession. Unless the text associated to the graph explains these issues, it does not seem very sincere to me. en.wikipedia.org/wiki/Cherry_picking – SJuan76 Mar 1 '18 at 10:41
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    @SJuan76 I think it is fair to say Smoot-Hawley didn't cause the crash, since it became a law only 8 months after the crash. – Evargalo Mar 1 '18 at 12:43
  • Could you tell us where, and in what context, you found this graphic ? – Evargalo Mar 1 '18 at 12:44
  • It was a graph on a yahoo finance page: finance.yahoo.com/news/… – user7548189 Mar 1 '18 at 16:39
  • @SJuan76 It certainly couldn't have caused the crash. But, it wouldn't be implausible, however, to argue that a Congressional response to the crash in the form of the Smoot-Hawley Tariff Act undermined investor confidence that government action had appropriately responded to the crash thereby causing equities to continue to collapse when they might otherwise have stabilized if a better response had been devised and implemented in the way that the bailouts in response to the 2008 crash did to some extent on the "nothing to fear by fear itself" theory. – ohwilleke Mar 1 '18 at 19:17
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Equities is another word for stocks. It looks like they are graphing against some kind of index. I checked the Wall Street Crash of 1929 on Wikipedia, but that uses a different scale for the Dow Jones Industrial Average, which was my first thought. They may be using a scale normalized to the value on January 2nd, 1929 or similar. A value of 100 at the beginning would suggest that.

Equities are not directly related to GNP or GDP. They can go down when GNP is going up. For example, the United States today or in 1986.

P.S. Smoot and Hawley would not have lost their seats in midterm elections in 1932. That was a presidential year. The closest midterm elections were in 1930 and 1934. A little research suggests that both lost in the presidential election of 1932, Hawley in the primary and Smoot in the general. The arrow may be in the right place for Hawley but not Smoot.

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  • While Hawley would have failed to be re-elected in the spring or summer of 1932 and Smoot would have failed to be re-elelcted in November of 1932, both men would have continued to hold office until early January of 1933 when their successors took office. – ohwilleke Mar 1 '18 at 19:07
  • A bit more precisely "US equities" in this context would mean the market capitalization of stock in publicly traded companies as a whole (even if it is merely using an index of that market to quantify that). The S&P would be preferred over the Dow for this kind of measure, because it is more broad based and representative, although we don't know what index was actually used from the illustration in the OP. – ohwilleke Mar 1 '18 at 19:11
  • The S&P 500 did not exist in 1929-35. The Composite Index, which would become the S&P 500, was much more narrow until 1957. The arrow is in the wrong place (1932) for when they were replaced in March of 1933. And of course it says "in...elections" not left office. – Brythan Mar 2 '18 at 0:16
  • @ohwilleke Additionally, the Dow is not directly based on market capitalization; every time the stock of a company on the index splits, the index has to be adjusted. – Acccumulation Apr 26 '18 at 21:47
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As mentioned in Brythan's answer, equities is another word for stock.

Without knowing the source of the article, it is impossible to know what was used in this graph to represent the 'US Equities' curve.

It could be the Dow Jones or some aggregate index computed in a different way. It is likely that the author used an index like the Dow Jones as a proxy for the valuation of all US stocks.

For convenience, whatever was used to represent the US equities has been normalized at 100 at the beginning of the period in 1929, so you can read the chart as a percentage evolution over time.

As per Wikipedia, Gross national product (GNP) is the market value of all the goods and services produced in one year by labor and property supplied by the citizens of a country. GNP

US Equity represents the valuation of the companies in the US. This does not have a single definition but the most common one would be, for each company, number of stocks issued for this company multiplied by the market value of a single stock (or market capitalization of a company).

So GNP and US Equities are not directly related, i.e. the GNP can increase while stock valuation can go down.

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  • This would have been a decent first answer but really adds nothing to the answer that was already present. – ohwilleke Apr 25 '18 at 20:41

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