What affect does mass selling of stock have on the economy?

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What affect does mass selling of stock have on the economy. With the recent stock markets plummeting, many people are selling their stocks. How does this affect the economy in terms of aggregate expenditures. Specifically consumer consumption of goods and services, investments, export and imports? Does the unemployment rate go up? What about inflation, does it go down or up?

I know buying and selling stocks is trading, it is just a exchange in assets, so it doesnt do anything to the economy. But I'm curious on what happens when everyone starts selling their stocks. Doesn't selling stocks need a buyer, so why does it collapse?

I'm taking micro and macro economics in university right now. But we have not really talked about the stock market. I'm just interested if anyone wants to answer some of my questions.

What affect does mass selling of stock have on the economy?

I would have thought of it a bit like this.

In any trade especially in share trading you have a winner and a loser.

However I would assume the effects of the stockmarket are a symptom of the economic conditions.

The fears of recession - weakening economic growth is what forces people to rethink the PE Ratios which many stock investors pride themselves on. Basically a repricing of debt/risk.

There are speculators out there but generally the PE Ratios kick in again and everyone snaps up a good bargain, however you must look at both sides of the argument, some people that believe a recession will occur will factor it into the company earnings forecasts as they only do this every quarter, this will cause lower earnings and thus lead to lower PE Ratio in their view, it all depends on the company to perform.

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What affect does mass selling of stock have on the economy?

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