In recent years, the Dow Jones Industrial Average has replaced manufac

QUESTION

In recent years, the Dow Jones Industrial Average has replaced manufacturing companies listed in the index with pharmaceutical and technology companies. Why?

A) to open the Dow to foreign companies
B) to reflect change in the U.S. economy
C) to add more companies selling preferred stock
D) to enhance computation of the index
E) to penalize manufacturing companies

ANSWER

Answer: B
Explanation: B) The Dow periodically changes stocks in the index to reflect changes in the U.S. economy. Thirty years ago, the country had a strong manufacturing base. The rise of the high-tech and healthcare industries and the decline of U.S. manufacturing led to changes in the index to accurately reflect characteristics of the U.S. economy.