BMC UPDATED Exam Questions and
CORRECT Answers
The primary of GDP - CORRECT 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. - CORRECT ANSWER-
If the measurement of economic activity evolves, GDP can change
Essential economic indicators - CORRECT ANSWER- -Economic growth
-Inflation
-Unemployment
-Business confidence
-Housing
Economic growth - CORRECT 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 - CORRECT ANSWER- It went down.
Inflation - CORRECT ANSWER- Nominal GDP growth - inflation = real GDP growth
Inflation erodes the value of bonds. Fixed income chairs utilize bonds. - CORRECT
ANSWER-
Inflation - CORRECT ANSWER- a general increase in prices and fall in the purchasing value
of money.
Where does one find inflation? - CORRECT 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 - CORRECT 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. - CORRECT
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 - CORRECT 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. - CORRECT 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? - CORRECT ANSWER- Nonfarm payrolls go
DOWN, the PMI indicator goes DOWN, the housing starts goes UP.
The primary of GDP - CORRECT 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 - CORRECT 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 - CORRECT ANSWER- Timeliness of release
CORRECT Answers
The primary of GDP - CORRECT 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. - CORRECT ANSWER-
If the measurement of economic activity evolves, GDP can change
Essential economic indicators - CORRECT ANSWER- -Economic growth
-Inflation
-Unemployment
-Business confidence
-Housing
Economic growth - CORRECT 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 - CORRECT ANSWER- It went down.
Inflation - CORRECT ANSWER- Nominal GDP growth - inflation = real GDP growth
Inflation erodes the value of bonds. Fixed income chairs utilize bonds. - CORRECT
ANSWER-
Inflation - CORRECT ANSWER- a general increase in prices and fall in the purchasing value
of money.
Where does one find inflation? - CORRECT 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 - CORRECT 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. - CORRECT
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 - CORRECT 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. - CORRECT 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? - CORRECT ANSWER- Nonfarm payrolls go
DOWN, the PMI indicator goes DOWN, the housing starts goes UP.
The primary of GDP - CORRECT 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 - CORRECT 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 - CORRECT ANSWER- Timeliness of release
