BLOOMBERG MARKET CONCEPTS ACTUAL
PAPER 2026 QUESTIONS WITH SOLUTIONS
GRADED A+
◉ nominal GDP vs real GDP. Answer: nominal GDP = $ amount of
GDP
real GDP growth = nominal GDP growth - inflation
(isolates increases in production and/or increases in prices of
goods&services)
◉ recession. Answer: 2 successive quarters of negative real GDP
growth
◉ inflation. Answer: general increase in prices of goods&services
which diminishes the purchasing power of money
(a unit of money tomorrow would buy less than the same unit of
money today)
◉ primary sources of inflation data. Answer: 1) personal
consumption expenditures (PCE)
^^ measure of price changes in consumer goods and services
^^ shows what consumers are spending their income on
2) consumer price index (CPI)
,^^ based on a representative basket of goods&services
^^ difficulties w/ being truly representative bc times, interests, &
tech change
^^ CPI basket is updated @ start of ea yr to reflect previous yr
◉ unemployment. Answer: consumer spending is almost purely
driven by salaries
^^ economy tends to shrink when more people lose their jobs
(depresses GDP growth)
1) nonfarm payrolls
^^ most important unemployment indicator
^^ measures monthly change in # of US employees
◉ business confidence. Answer: businesses make large investments
and hire people when they feel confident there will be additional
demand for their goods&services
1) purchasing managers index (PMI)
^^ index of US manufacturing activity
^^ surveys people in charge of buying goods and services for
corporations
^^ above 50 = optimism, below 50 = pessimism
,◉ housing. Answer: 1) housing starts
^^ before construction begins, must be confident that future home
buyers can assume 30 yr mortgages
^^ after buying a new house, consumer also purchases appliances,
interior decorations, etc
◉ main entities that trade currencies. Answer: 1) financial
institutions buying&selling securities in foreign currencies
2) corporations selling goods&services across borders
3) travelers changing currencies for personal use
◉ pegged currencies. Answer: currencies that are linked to another
currency with a locked exchange rate
^^ done to offer impression of certainty
^^ oftentimes difficult to convince others that pegged currency is as
strong as peg
peg currency using FX reserves
^^ "a stack of cash used to manipulate supply and demand of
currency"
^^ USD = most common FX reserve currency bc most liquid
, govs also lift interest rates to defend pegs
◉ triangular arbitrage. Answer: keeping currency matrix fixed so
you can't make money converting between currencies
◉ currency valuation. Answer: change in rate of one currency pair
only tells relative value of those two currencies
^^ use trade-weighted baskets to determine overall strength or
weakness of a currency
(identical goods&services should cost the same, no matter where
they're sold around the world)
◉ main currency drivers. Answer: 1) surprise changes in interest
rates
^^ rise in interest rates in one country will cause that country's
currency to strengthen relative to another
2) surprise changes in inflation
^^ money supply of one country expands rapidly compared to
another country... exchange rate of first country will depreciate
against the second country
3) surprise changes in trade
^^ when exporting, foreign buyer needs to buy home currency of the
exporter
(x-m) = positive = demand for home currency
PAPER 2026 QUESTIONS WITH SOLUTIONS
GRADED A+
◉ nominal GDP vs real GDP. Answer: nominal GDP = $ amount of
GDP
real GDP growth = nominal GDP growth - inflation
(isolates increases in production and/or increases in prices of
goods&services)
◉ recession. Answer: 2 successive quarters of negative real GDP
growth
◉ inflation. Answer: general increase in prices of goods&services
which diminishes the purchasing power of money
(a unit of money tomorrow would buy less than the same unit of
money today)
◉ primary sources of inflation data. Answer: 1) personal
consumption expenditures (PCE)
^^ measure of price changes in consumer goods and services
^^ shows what consumers are spending their income on
2) consumer price index (CPI)
,^^ based on a representative basket of goods&services
^^ difficulties w/ being truly representative bc times, interests, &
tech change
^^ CPI basket is updated @ start of ea yr to reflect previous yr
◉ unemployment. Answer: consumer spending is almost purely
driven by salaries
^^ economy tends to shrink when more people lose their jobs
(depresses GDP growth)
1) nonfarm payrolls
^^ most important unemployment indicator
^^ measures monthly change in # of US employees
◉ business confidence. Answer: businesses make large investments
and hire people when they feel confident there will be additional
demand for their goods&services
1) purchasing managers index (PMI)
^^ index of US manufacturing activity
^^ surveys people in charge of buying goods and services for
corporations
^^ above 50 = optimism, below 50 = pessimism
,◉ housing. Answer: 1) housing starts
^^ before construction begins, must be confident that future home
buyers can assume 30 yr mortgages
^^ after buying a new house, consumer also purchases appliances,
interior decorations, etc
◉ main entities that trade currencies. Answer: 1) financial
institutions buying&selling securities in foreign currencies
2) corporations selling goods&services across borders
3) travelers changing currencies for personal use
◉ pegged currencies. Answer: currencies that are linked to another
currency with a locked exchange rate
^^ done to offer impression of certainty
^^ oftentimes difficult to convince others that pegged currency is as
strong as peg
peg currency using FX reserves
^^ "a stack of cash used to manipulate supply and demand of
currency"
^^ USD = most common FX reserve currency bc most liquid
, govs also lift interest rates to defend pegs
◉ triangular arbitrage. Answer: keeping currency matrix fixed so
you can't make money converting between currencies
◉ currency valuation. Answer: change in rate of one currency pair
only tells relative value of those two currencies
^^ use trade-weighted baskets to determine overall strength or
weakness of a currency
(identical goods&services should cost the same, no matter where
they're sold around the world)
◉ main currency drivers. Answer: 1) surprise changes in interest
rates
^^ rise in interest rates in one country will cause that country's
currency to strengthen relative to another
2) surprise changes in inflation
^^ money supply of one country expands rapidly compared to
another country... exchange rate of first country will depreciate
against the second country
3) surprise changes in trade
^^ when exporting, foreign buyer needs to buy home currency of the
exporter
(x-m) = positive = demand for home currency
