GDP: output produced inside the border. GNP: output produced by the country's own people, anywhere. NOT interchangeable measures.
The method for this kind of question
Predicts or confirms: never both
Now answer
2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.
Question 1Exam level
Which of the following is classified as a lagging economic indicator?
How sure are you?
Correct: C. Employers are slow to cut staff and slow to rehire, so the unemployment rate turns after the cycle does.
A. The interest-rate spread moves ahead of a turn, which is leading, not lagging.
B. GDP measures output as it happens, which is coincident.
D. A building permit is filed before construction begins, which is about as leading as an indicator gets.
Unit: SIE outline 1.3.2
Question 2Above the exam
Interest rates rise sharply. What happens to the prices of outstanding bonds, and separately, to the valuation of a growth stock whose earnings are expected mainly ten years from now?
How sure are you?
Correct: B. Rising rates push outstanding bond prices down, since their older coupons are worth less against new ones, and the same rate move presses on a growth stock's valuation, since its worth sits in distant earnings that are now discounted harder.
A. Reverses both effects; rising rates push bond prices down, and pressure growth valuations, not the reverse.
C. A growth stock has no coupon, but its future earnings are still discounted at the prevailing rate, so it is not immune.
D. Gets the bond direction backwards and invents a fixed opposite relationship between the two that the source does not state; both move down together under rising rates.