Economic Indicators Questions and Answers 100% Solved

Economic Indicators Questions and Answers 100 % Solved 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? ✔️✔️It went down. As imports act as a drag on GDP, the larger growth in imports offsets the growth in consumption, thereby causing GDP to decline. In 2015, an accounting gimmick gave Ireland a 26% growth rate in GDP. What does this event reflect about the nature of GDP? ✔️✔️If the measurement of economic activity evolves, GDP can change. Governments from time to time change the scope of and criteria for GDP measurement, as we saw with Nigeria and Italy. In the United States, why is there a strong relationship between unemployment and GDP? ✔️✔️Consumer spending accounts for 2/3 of the US economy. When the number of unemployed consumers rises, there is less consumer spending. The fact that the United States is largely a consumer economy leads to the tight connection between US unemployment and the US GDP. The US is a net importer, not a net exporter. Government benefit payments rise when unemployment rises. From an overall GDP perspective, however, this is more than offset by declines in consumer spending. Take a look at the GDP components for the United States in the World Economic Statistics screen (ECST <GO>) below. which GDP component was the biggest contributor at the time that this screen was captured? ✔️✔️Consumer Spending Personal consumption expenditures (consumer spending) was the highest contributor to the US GDP at $19.5 trillion. Which of the following lines is the best leading economic indicator? ✔️✔️PMI The goal of leading indicator is to be alerted to forthcoming turning points in real GDP growth. In the great recession starting in late 2008, PMI fell to its low point and started to recover well in advance of GDP falling to its low point and then rebounding. GDP per capita is a measure of prosperity because it divides the total GDP of a country by its population. Which of the below forecasts for a country would result in the highest GDP per capita growth? ✔️✔️An increase of 2% and a population growth of 0%. Accounting for population growth is a major factor in determining how prosperous a country can become. An increase in gross GDP is not the only factor that determines the prosperity growth of a country. What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of a recession in the United States? ✔️✔️Nonfarm payrolls go DOWN, the PMI indicator goes DOWN, the housing starts goes DOWN. At the onset of recession, people lose their jobs, businesses lose confidence, and fewer people can afford to buy houses. Accordingly, nonfarm payrolls, which measures the change in the number of people with jobs, goes down. The PMI indicator, which denotes confidence with a high reading and anxiety with a low reading, goes down. The housing starts, Which represent the number of new houses being built, also goes down. Which of the following qualities of economic indicators do investors prize the most? ✔️✔️Timeliness of release Investors value data that comes out with the least lag possible so they can make decisions on a timely basis. The more timely the data, the more valuable it si to investors and policy makers.