Bloomberg Market Concepts (BMC With Complete Solutions)
How accurately do GDP portray the economy and why? Ans - Inaccurately because the scope
of GDP measurements can change.
Consider the formula GDP = C+I+G+(X-M). A country is undergoing a boom in consumption of
domestic and foreign luxury goods. In one year, the dollar growth in imports is greater than the
dollar growth in domestic consumption. Assuming nothing else has changed, what happened to
GDP? Ans - It went down
what is the meaning of each letter in the GDP formula, C+I+G+(X-M). Ans - C= Consumer
spending
I = Investment (Gross Fixed Capital Formation)
G= Government Spending
X= Exports
M= Imports
Here is the most important economic data for Australia and Sweden. which economy did better
year-over-year (YOY) in the fourth quarter of 2013 compared to the fourth quarter of 2012? Use
the two charts to investigate. Ans - Sweden performed better
In the United States, why is there a strong correlation between unemployment and GDP? Ans -
Consumer spending accounts for two-thirds of the U.S. economy when the number of
unemployed consumers rises, there is less consumer spending.
Here is a chart showing both nominal GDP growth and real GDP growth for a country. Which of
the following can be a true statement at the time the chart was captured? Ans - The country has
deflation. The bottom line is nominal growth and the top line is real growth.
Which of the following lines is the best leading economic indicator? Ans - PMI
What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of
a recession in the United States? Ans - Nonfarm payrolls go down, the PMI indicator goes
DOWN, the housing starts goes down.
Which of the following qualities of economic indicators do investors prize the most? Ans -
Timeliness of release
Why is the release of GDP statistics less interesting to investors than the release of other
economic indicators? Ans - Because GDP statistics are released well after other economic
indicators.
Which of the following important U.S. economic indicators is only available on a quarterly
basis? Ans - GDP
, Which economic indicator is most directly linked to unemployment? Ans - nonfarm payrolls
What is the main reason that investment banks create estimates of economic indicators? Ans -
To know when specific economic data points are a positive or negative surprise.
Which of the following is the biggest pitfall of economic indicators? Ans - They do not
consistently presage turning points.
Which country is the fourth biggest importer and exporter? Ans - Japan
Which of the following is not an example of a failed peg? Ans - Hong Kong dollar against the
U.S. dollar in 1997.
What generally happens when a central bank unexpectedly increases interest rates? Ans - The
currency strengthens.
Which driver weakened the Swiss franc? Ans - A surprise change in inflation expectations
What does the Big Mac index show? Ans - How currencies may be overvalued or undervalued.
Which of the following are short-term drivers of currency valuation? Ans - Surprise changes in
interest rates, inflation, and trade.
By what mechanism do interest rates affect currency values? Ans - Global investors are
attracted by higher bond yields in high interest rate countries.
Which of these headlines could move a currency pair? Ans - U.S. Stocks rally on Fed's
Surprise reduction of Interest Rate.
What is the most common target inflation rate for an advanced economy? Ans - 2%
What was the primary goal of Abenomics? Ans - To halt the vicious cycle of deflation
Here is the vicious deflationary cycle. What step connects the lower left gray arrow to the upper
right blue arrow? Ans - prices decline
Were the two oil crises in the 1970s linked to deflation or inflation? Ans - Inflation
Why would Jack Welch suggest putting all company plants on barges? Ans - To respond
quickly to changes in the currency markets.
Legendary investor Warren Buffett said, "Gold gets dug out of the ground..... Then we melt it
down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.
Anyone watching from Mars would be scratching their head." Based on this quotation, what
quality of gold is he referring to? Ans - Its storage costs
How accurately do GDP portray the economy and why? Ans - Inaccurately because the scope
of GDP measurements can change.
Consider the formula GDP = C+I+G+(X-M). A country is undergoing a boom in consumption of
domestic and foreign luxury goods. In one year, the dollar growth in imports is greater than the
dollar growth in domestic consumption. Assuming nothing else has changed, what happened to
GDP? Ans - It went down
what is the meaning of each letter in the GDP formula, C+I+G+(X-M). Ans - C= Consumer
spending
I = Investment (Gross Fixed Capital Formation)
G= Government Spending
X= Exports
M= Imports
Here is the most important economic data for Australia and Sweden. which economy did better
year-over-year (YOY) in the fourth quarter of 2013 compared to the fourth quarter of 2012? Use
the two charts to investigate. Ans - Sweden performed better
In the United States, why is there a strong correlation between unemployment and GDP? Ans -
Consumer spending accounts for two-thirds of the U.S. economy when the number of
unemployed consumers rises, there is less consumer spending.
Here is a chart showing both nominal GDP growth and real GDP growth for a country. Which of
the following can be a true statement at the time the chart was captured? Ans - The country has
deflation. The bottom line is nominal growth and the top line is real growth.
Which of the following lines is the best leading economic indicator? Ans - PMI
What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of
a recession in the United States? Ans - Nonfarm payrolls go down, the PMI indicator goes
DOWN, the housing starts goes down.
Which of the following qualities of economic indicators do investors prize the most? Ans -
Timeliness of release
Why is the release of GDP statistics less interesting to investors than the release of other
economic indicators? Ans - Because GDP statistics are released well after other economic
indicators.
Which of the following important U.S. economic indicators is only available on a quarterly
basis? Ans - GDP
, Which economic indicator is most directly linked to unemployment? Ans - nonfarm payrolls
What is the main reason that investment banks create estimates of economic indicators? Ans -
To know when specific economic data points are a positive or negative surprise.
Which of the following is the biggest pitfall of economic indicators? Ans - They do not
consistently presage turning points.
Which country is the fourth biggest importer and exporter? Ans - Japan
Which of the following is not an example of a failed peg? Ans - Hong Kong dollar against the
U.S. dollar in 1997.
What generally happens when a central bank unexpectedly increases interest rates? Ans - The
currency strengthens.
Which driver weakened the Swiss franc? Ans - A surprise change in inflation expectations
What does the Big Mac index show? Ans - How currencies may be overvalued or undervalued.
Which of the following are short-term drivers of currency valuation? Ans - Surprise changes in
interest rates, inflation, and trade.
By what mechanism do interest rates affect currency values? Ans - Global investors are
attracted by higher bond yields in high interest rate countries.
Which of these headlines could move a currency pair? Ans - U.S. Stocks rally on Fed's
Surprise reduction of Interest Rate.
What is the most common target inflation rate for an advanced economy? Ans - 2%
What was the primary goal of Abenomics? Ans - To halt the vicious cycle of deflation
Here is the vicious deflationary cycle. What step connects the lower left gray arrow to the upper
right blue arrow? Ans - prices decline
Were the two oil crises in the 1970s linked to deflation or inflation? Ans - Inflation
Why would Jack Welch suggest putting all company plants on barges? Ans - To respond
quickly to changes in the currency markets.
Legendary investor Warren Buffett said, "Gold gets dug out of the ground..... Then we melt it
down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.
Anyone watching from Mars would be scratching their head." Based on this quotation, what
quality of gold is he referring to? Ans - Its storage costs
