NASAA Series 66 Uniform Combined State Law ExaminationEconomic Factors and Business InformationEasy
A financial advisor is evaluating a client's portfolio performance during a period of sustained economic growth, characterized by increasing consumer spending and rising corporate profits. Which of the following economic indicators would best confirm this observed economic expansion?
- AA rise in the unemployment rate.
- BA decline in the Consumer Price Index (CPI).
- CA decrease in manufacturing new orders.
- DAn increase in Gross Domestic Product (GDP).
Show answer & explanationAnswer & explanation
Correct answer: D. An increase in Gross Domestic Product (GDP).
Gross Domestic Product (GDP) is the primary measure of a country's economic output and growth. An increase in GDP directly reflects an expanding economy with rising production and income.
Why the other options are wrong
- A. A rising unemployment rate indicates a contracting or slowing economy, not expansion.
- B. A decline in CPI indicates deflation or disinflation, which is not typically associated with robust economic expansion.
- C. A decrease in manufacturing new orders suggests a slowdown in industrial activity, contrary to economic expansion.
Gross Domestic Product (GDP)
The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.
- Primary measure of economic health.
- Includes consumption, investment, government spending, and net exports.
- An increase generally signifies economic growth.
Memory trick: GDP Grows, Prosperity Shows.