Changes in Nominal GNP: Understanding the Impact | Test Prep

Exploring the Impact of Changes in Nominal GNP

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Question

Changes in nominal GNP have been found to have

Answers

A. little correlation with sales per share for stock series such as the S&P 400.

B. a relatively high correlation with EBIT for stock series such as the S&P 400.

C. a relatively high correlation with sales per share for stock series such as the S&P 400.

D. a relatively high correlation with net profits for stock series such as the S&P 400.

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Explanations

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A. B. C. D.

Studies have found that about 40% of the variance in percentage changes in S&P 400 sales can be explained by percentage changes in nominal GNP. Estimating

GNP is thus used to help estimate earnings per share for stock series such as the S&P 400.

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