BMC EXAM QUESTIONS AND ANSWERS GRADED A+
100% CORRECT
The primary of GDP - ANSWER: Main measure of economic activity
8% compounded annual growth since about 1960
In 2015, an accounting gimmick gave Ireland a 26% growth rate in GDP. what does
this event reflect about the nature of GDP?
-Because the GDP is official, its numbers are not subject to interpretation.
-Governments are required to change GDP calculations every five years.
-Inputs to GD{ are all qualitative, not quantitative
-If the measurement of economic activity evolves, GDP can change. - ANSWER: If the
measurement of economic activity evolves, GDP can change
Essential economic indicators - ANSWER: -Economic growth
-Inflation
-Unemployment
-Business confidence
-Housing
Economic growth - ANSWER: -Measured by GDP
- GDP = C + I + G + (X-M)
- ECST function to see breakdown
Consider the GDP formula. 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 all else equal,
what happened to GDP?
-There is not enough info to tell
-It went down
-Stayed the same
-It went up - ANSWER: It went down.
Inflation - ANSWER: Nominal GDP growth - inflation = real GDP growth
Inflation - ANSWER: a general increase in prices and fall in the purchasing value of
money.
Where does one find inflation? - ANSWER: Quarterly GDP report: the whole
economy is the data input, the inflation source is the GDP price deflator.
Monthly CPI: Bureau of labor of statistics posts it, the data input is a average basket
of goods and services, and the inflation source is the labor departments inflation
report.
,Unemployment - ANSWER: Measures the number of people who are able to work,
but do not have a job during a period of time.
In the U.S. why is there a strong relationship between unemployment and GDP?
-As the economy booms, private investment, government spending, and net exports
will cause GDP to rise, leading to unemployment.
-Consumer spending accounts for two-thirds of the US economy. When the number
of unemployed consumers rises, there is less consumer spending.
-As the U.S. is a net exporter, exports go down when workers are unemployed. This
is because there are fewer workers manufacturing products for the global markets.
-In the US, government spending accounts for 17% of GDP. When unemployment
rises, governments spend more on unemployment benefits. Therefore, GDP rises. -
ANSWER: Consumer spending accounts for two-thirds of the U.S. economy. When
the number of unemployed consumers rises, there is less consumer spending.
Which of the following lines is the best leading economic indicator?
-Nonfarm payrolls
-PMI
-Real GDP growth
-U.S. auto sales - ANSWER: PMI
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. - ANSWER: An increase of 2% in GDP and a
population growth of 0%.
(Want to find biggest difference in GPD to pop growth)
What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at
the onset of a recession in the United States? - ANSWER: Nonfarm payrolls go
DOWN, the PMI indicator goes DOWN, the housing starts goes UP.
The primary of GDP - ANSWER: -Real GDP growth is the main gauge of economic
health.
-Economic growth is cyclical, with a series of booms and busts.
-Investors interpret the economy through economic indicators.
-Leading indicators attract the most investor interest.
WECO function - ANSWER: Shows you all economic releases of the world through the
year.
Which of the following qualities of economic indicators do investors prize the most?
-Sample size
, -Government source
-Timeliness of release
-Rigor - ANSWER: Timeliness of release
Why is the release of GDP statistics less interesting to investors than the release of
other economic indicators?
-Because the formula for GDP includes not only private investment but also other
irrelevant factors
-Because GDP is not official government data
-Because governments consistently alter their GDP measurement methods
-Because GDP are released well after other economic indictors - ANSWER: Because
GDP statistics are released well after other economic indicators
Which of the following important US economic indictors is only available on a
quarterly basis?
Nonfarm payrolls
CPI
PMI
GDP - ANSWER: GDP
Which economic indicator is most directly linked to the average person's cost of
living?
PMI
CPI
Nonfarm payrolls
GDP - ANSWER: CPI
Monitoring GDP - ANSWER: -GDP estimation by governments is time-consuming,
periodic activity.
-GDP arrives too late to be useful to investors.
-Instead, investors glean GDP growth through more timely indicators.
-The indicators that are released first attract the most attention.
Economic surprise monitor - ANSWER: ECSU
What is the main reason that investment banks create estimates of economic
indictors?
-To hold governments accountable for management of their economies.
-To increase real GDP growth by exporting their intellectual property to foreign
investors.
-To know when specific economic data points are a positive or negative surprise.
-To determine in which countries the bank should operate - ANSWER: To know when
specific economic data points are a positive or negative surprise.
100% CORRECT
The primary of GDP - ANSWER: Main measure of economic activity
8% compounded annual growth since about 1960
In 2015, an accounting gimmick gave Ireland a 26% growth rate in GDP. what does
this event reflect about the nature of GDP?
-Because the GDP is official, its numbers are not subject to interpretation.
-Governments are required to change GDP calculations every five years.
-Inputs to GD{ are all qualitative, not quantitative
-If the measurement of economic activity evolves, GDP can change. - ANSWER: If the
measurement of economic activity evolves, GDP can change
Essential economic indicators - ANSWER: -Economic growth
-Inflation
-Unemployment
-Business confidence
-Housing
Economic growth - ANSWER: -Measured by GDP
- GDP = C + I + G + (X-M)
- ECST function to see breakdown
Consider the GDP formula. 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 all else equal,
what happened to GDP?
-There is not enough info to tell
-It went down
-Stayed the same
-It went up - ANSWER: It went down.
Inflation - ANSWER: Nominal GDP growth - inflation = real GDP growth
Inflation - ANSWER: a general increase in prices and fall in the purchasing value of
money.
Where does one find inflation? - ANSWER: Quarterly GDP report: the whole
economy is the data input, the inflation source is the GDP price deflator.
Monthly CPI: Bureau of labor of statistics posts it, the data input is a average basket
of goods and services, and the inflation source is the labor departments inflation
report.
,Unemployment - ANSWER: Measures the number of people who are able to work,
but do not have a job during a period of time.
In the U.S. why is there a strong relationship between unemployment and GDP?
-As the economy booms, private investment, government spending, and net exports
will cause GDP to rise, leading to unemployment.
-Consumer spending accounts for two-thirds of the US economy. When the number
of unemployed consumers rises, there is less consumer spending.
-As the U.S. is a net exporter, exports go down when workers are unemployed. This
is because there are fewer workers manufacturing products for the global markets.
-In the US, government spending accounts for 17% of GDP. When unemployment
rises, governments spend more on unemployment benefits. Therefore, GDP rises. -
ANSWER: Consumer spending accounts for two-thirds of the U.S. economy. When
the number of unemployed consumers rises, there is less consumer spending.
Which of the following lines is the best leading economic indicator?
-Nonfarm payrolls
-PMI
-Real GDP growth
-U.S. auto sales - ANSWER: PMI
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. - ANSWER: An increase of 2% in GDP and a
population growth of 0%.
(Want to find biggest difference in GPD to pop growth)
What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at
the onset of a recession in the United States? - ANSWER: Nonfarm payrolls go
DOWN, the PMI indicator goes DOWN, the housing starts goes UP.
The primary of GDP - ANSWER: -Real GDP growth is the main gauge of economic
health.
-Economic growth is cyclical, with a series of booms and busts.
-Investors interpret the economy through economic indicators.
-Leading indicators attract the most investor interest.
WECO function - ANSWER: Shows you all economic releases of the world through the
year.
Which of the following qualities of economic indicators do investors prize the most?
-Sample size
, -Government source
-Timeliness of release
-Rigor - ANSWER: Timeliness of release
Why is the release of GDP statistics less interesting to investors than the release of
other economic indicators?
-Because the formula for GDP includes not only private investment but also other
irrelevant factors
-Because GDP is not official government data
-Because governments consistently alter their GDP measurement methods
-Because GDP are released well after other economic indictors - ANSWER: Because
GDP statistics are released well after other economic indicators
Which of the following important US economic indictors is only available on a
quarterly basis?
Nonfarm payrolls
CPI
PMI
GDP - ANSWER: GDP
Which economic indicator is most directly linked to the average person's cost of
living?
PMI
CPI
Nonfarm payrolls
GDP - ANSWER: CPI
Monitoring GDP - ANSWER: -GDP estimation by governments is time-consuming,
periodic activity.
-GDP arrives too late to be useful to investors.
-Instead, investors glean GDP growth through more timely indicators.
-The indicators that are released first attract the most attention.
Economic surprise monitor - ANSWER: ECSU
What is the main reason that investment banks create estimates of economic
indictors?
-To hold governments accountable for management of their economies.
-To increase real GDP growth by exporting their intellectual property to foreign
investors.
-To know when specific economic data points are a positive or negative surprise.
-To determine in which countries the bank should operate - ANSWER: To know when
specific economic data points are a positive or negative surprise.
