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Introduction To Financial Principles (FNCE2005) BMC

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Sandra Watson
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BMC sol – Answer-how have economic forecasts for this country evolved

Curtin University

Introduction to Financial Principles (FNCE2005)

Bloomberg Answers
Economic Indicators
The Primacy of GDP (30 min.)
Knowledge Check 1
How accurately do GDP statistics portray the economy and why?

Knowledge Check 2
Consider the formula GDP = C + I + (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?

Knowledge Check 3
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.

Knowledge Check 4
In the US, why is there a strong correlation between unemployment and GDP?

SECTION QUIZ
1. 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?

2. Which of the following lines is the best leading economic factor?

3. The “misery index” is often cited in the media as a way to measure consumer pain. It is
defined as the inflation rate plus the unemployment rate. Review and identify the
country with the highest “misery index.”

4. What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the
onset of a recession in the United States?

Monitoring GDP (10 min.)
SECTION QUIZ
1. Which of the following qualities of economic indicators do investors prize the most?

2. Why is the release of GDP statistics less interesting to investors than the release of other
economic indicators?

3. Which of the following important U.S. economic indicators is only available on a
quarterly basis?

4. Which economic indicator is most directly linked to unemployment?

Forecasting GDP (20 min.)
Knowledge Check 1
Here is the economic calendar for the UK for August 2013. Examine indicators like PMI, house
prices, industrial production, employment, retail sales, and GDP. Based on these major
indicators, how did the UK economy perform overall?

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Introduction To Financial Principles (FNCE2005) BMC

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