BLOOMBERG QUESTIONS AND ANSWERS ALREADY PASSED

BLOOMBERG QUESTIONS AND ANSWERS ALREADY PASSED How accurately do GDP statistics portray the economy and why? ✔✔Just because they are official and numerical does not mean they are accurate. The term "domestic" in GDP ...

BLOOMBERG QUESTIONS AND ANSWERS ALREADY PASSED How accurately do GDP statistics portray the economy and why? ✔✔Just because they are official and numerical does not mean they are accurate. The term "domestic" in GDP unambiguously links to a nation state. Why is economic data helpful in the investment process? ✔✔If an economy is doing well then certain companies will sell more of their product as household budgets also increase. What 5 data inputs matters most to investors? ✔✔Economic growth, inflation, unemployment, business confidence, and housing. How do you calculate GDP? ✔✔GDP= C + I = G + (X-M). C= Personal consumption. I= private investment. G= government consumption. X= exports. M= imports. (X-M)= net exports. nominal growth (growth rate) ✔✔increases in production and increases in price real GDP ✔✔isolates increases in production If growth rate (nominal GDP) = inflation rate, then... ✔✔real growth rate is at zero. If Nominal GDP rate > inflation rate, then... ✔✔Real Growth Rate is positive. Is the economy cyclical? ✔✔Yes, there are quarters of growth and recession. Recession ✔✔two successive quarters of negative real GDP growth Inflation (CPI) ✔✔unveils the real growth in the economy. It can erode the value of bonds. It means that a unit of money tomorrow buys less than the same unit of money would buy today. This accounts for the rising cost of living. Increase in prices of goods and services that diminishes purchasing power of money. What are the two sources for inflation reports? ✔✔GDP Report: based on whole economy. Consumer Price Index: based on representative basket of goods, and services, like food, housing and automobiles How does time change representative inflation baskets? ✔✔With changes in technology. Like DVD players are replaced with online streaming. If nominal GDP growth line or percentage is less than the real GDP, then... ✔✔there is deflation. Why is unemployment so important to the US economy? ✔✔The fact that the US is largely a consumer economy leads to the tight connection between US employment and US GDP. An overall increase in unemployment depresses GDP growth. When the economy shrinks, employment declines. Nonfarm payrolls ✔✔measure the change in the number of people with jobs and during a recession, this goes down. This is the unemployment report. Business confidence (PMI): ✔✔business people make large investments and hire people when they think there will be additional demand in the future. BEST LEADING INDICATOR TO ALERT FORTHCOMING TURNING POINTS. The Institute for Supply Management (ISM) ✔✔Surveys people in charge of buying goods and services for corporations about business conditions. It has the most widely followed index of US business confidence. Above 50= optimism. Below 50= pessimism. Can PMI indicate GDP growth? ✔✔Yes, for most recessions shown, the PMI indicator dipped shortly before GDP decline. You can predict GDP decline. why is housing a good economic indicator? ✔✔homeowners build houses, they need to believe that consumers can assume a 30-year mortgage. After buying a new house, people buy furniture, tvs, gaming systems, redo kitchens, etc. Housing against real GDP can also show a relationship= positive and positive Where on the terminal can you find a chronological list of indicators that will be released after January 1? ✔✔World Economic Calendar Which indicators get the most attention? ✔✔PMI and nonfarm payrolls (get most attention): January's number is published in February. If the Actual exceeds the estimate, that is a good sign! If it doesn't, it is a bad sign. Housing comes out every month and a half. CPI (inflation) released: middle of every month. Is GDP important for economic growth? ✔✔No, "New news" moves markets, GDP is old news—released after we already know what is going on because of other economic indicators. Analysts maintain estimates. What is in the Relevance column? ✔✔Volume of alerts set up for each indicator. The greater the investor interest, the greater the relevance. Both are at full strength for PMI and employment. The Survey column ✔✔Contains the analyst consensus forecast for that indicator. Terminal has the analyst estimates, the actual previous rate, and the previous rate. How do you calculate the Median Estimate for PMI? ✔✔Calculated by taking the average of the estimates from 80+ economists. How do economists form opinions on long term f