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Free Questions › CFA › Economics
Free CFA Economics Practice Questions & Answers
2,050 exam-style Economics questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 1021
High inflation and deteriorating employment may signal:
Select an option first.
Correct answer: B — Political unrest
Explanation: ✔ Why correct: Economic stress often precedes unrest. Wrong: A, C, D: Not accurate.
Question 1022
A pegged currency with falling export value may signal:
Select an option first.
Correct answer: B — Potential change in exchange-rate policy
Explanation: ✔ Why correct: Pressure on the peg may force adjustment. Wrong: A, C, D: Incorrect.
Question 1023
High-velocity geopolitical risks often manifest as:
Select an option first.
Correct answer: B — Immediate asset price volatility
Explanation: ✔ Why correct: Sudden shocks move markets quickly. Wrong: A, C, D: Not correct.
Question 1024
During COVID-19 shutdowns, markets:
Select an option first.
Correct answer: B — Experienced sharp declines and volatility
Explanation: ✔ Why correct: The S&P 500 fell nearly 34%. Wrong: A, C, D: False.
Question 1025
Bond yields fell during COVID-19 because:
Select an option first.
Correct answer: B — Investors fled to safety
Explanation: ✔ Why correct: Flight to safety raises bond prices, lowering yields. Wrong: A, C, D: Not accurate.
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Question 1026
Asset allocators use geopolitical risk to:
Select an option first.
Correct answer: B — Adjust asset allocation across countries
Explanation: ✔ Why correct: Risk affects country selection and assumptions. Wrong: A, C, D: Incorrect.
Question 1027
Countries with multilateral histories may:
Select an option first.
Correct answer: A — Attract more investor flows
Explanation: ✔ Why correct: Reliability attracts capital. Wrong: B, C, D: Not accurate.
Question 1028
Countries with consistent military threat may:
Select an option first.
Correct answer: B — Have lower growth potential
Explanation: ✔ Why correct: Disruptions reduce economic and investment growth. Wrong: A, C, D: Opposite.
Question 1029
In multifactor models, geopolitical risk can be:
Select an option first.
Correct answer: B — A factor affecting buy/sell decisions
Explanation: ✔ Why correct: It influences confidence intervals and factor weights. Wrong: A, C, D: Not correct.
Question 1030
A diversified production footprint:
Select an option first.
Correct answer: B — Reduces impact of disruptions
Explanation: ✔ Why correct: Multiple production sites reduce vulnerability. Wrong: A, C, D: Not accurate.
Question 1031
For low-risk-tolerance investors, geopolitical risk may require:
Select an option first.
Correct answer: B — Hedging or low-volatility choices
Explanation: ✔ Why correct: They prefer stability and protection. Wrong: A, C, D: Opposite.
Question 1032
For long-horizon investors, exogenous shocks may be:
Select an option first.
Correct answer: A — Buying opportunities
Explanation: ✔ Why correct: Long horizons allow recovery and opportunistic buying. Wrong: B, C, D: Not accurate.
Question 1033
For investors near retirement, exogenous shocks:
Select an option first.
Correct answer: B — Can severely harm terminal wealth
Explanation: ✔ Why correct: They have limited time to recover losses. Wrong: A, C, D: Not true.
Question 1034
Global cooperation increases the stakes of geopolitical risk because:
Select an option first.
Correct answer: B — Interconnected systems amplify disruptions
Explanation: ✔ Why correct: Interdependence spreads shocks. Wrong: A, C, D: Incorrect.
Question 1035
Investors who ignore geopolitical risk:
Select an option first.
Correct answer: B — Do so at their peril
Explanation: ✔ Why correct: Geopolitical shocks can materially affect portfolios. Wrong: A
Question 1036
Geopolitical risk can influence asset allocation because:
Select an option first.
Correct answer: B — Countries with stable multilateral histories may attract more capital
Explanation: ✔ Why correct: Stable, cooperative countries are viewed as safer, attracting investor flows. ✘ Why others wrong: A: Countries differ widely in risk. C: Investors do consider geopolitical risk. D: Risk directly affects required returns.
Question 1037
A country facing persistent military threat may experience:
Select an option first.
Correct answer: B — Lower economic and investment potential
Explanation: ✔ Why correct: Ongoing conflict risk disrupts economic activity and deters investment. ✘ Why others wrong: A, C, D: Opposite of typical outcomes.
Question 1038
In multifactor models, geopolitical risk can be incorporated as:
Select an option first.
Correct answer: A — A factor affecting confidence intervals and valuations
Explanation: ✔ Why correct: Analysts adjust factor weights and confidence based on geopolitical exposure. ✘ Why others wrong: B, C, D: Not accurate.
Question 1039
A company with diversified global production may have:
Select an option first.
Correct answer: B — Lower impact because production can shift
Explanation: ✔ Why correct: Multiple production sites reduce vulnerability to localized shocks. Wrong: A, C, D: Incorrect.
Question 1040
For low-risk-tolerance investors, geopolitical risk may require:
Select an option first.
Correct answer: B — Reducing exposure or hedging
Explanation: ✔ Why correct: Conservative investors prefer stability and protection. Wrong: A, C, D: Opposite of prudent behavior.
Question 1041
For long-horizon investors, geopolitical shocks may be:
Select an option first.
Correct answer: A — Buying opportunities
Explanation: ✔ Why correct: Long horizons allow recovery and opportunistic entry. Wrong: B, C, D: Not accurate.
Question 1042
For investors nearing retirement, geopolitical shocks:
Select an option first.
Correct answer: B — Can significantly harm terminal wealth
Explanation: ✔ Why correct: They have limited time to recover from losses. Wrong: A, C, D: Not true.
Question 1043
Interconnected global systems increase geopolitical risk because:
Select an option first.
Correct answer: B — Shocks in one country can spread to others
Explanation: ✔ Why correct: Interdependence amplifies spillover effects. Wrong: A, C, D: Incorrect.
Question 1044
Ignoring geopolitical risk can lead to:
Select an option first.
Correct answer: B — Significant portfolio vulnerability
Explanation: ✔ Why correct: Geopolitical shocks can materially damage portfolios. Wrong: A, C, D: False.
Question 1045
High-velocity geopolitical risks most commonly affect:
Select an option first.
Correct answer: B — Asset prices immediately
Explanation: ✔ Why correct: Sudden shocks trigger rapid market reactions. Wrong: A, C, D: Too narrow.
Question 1046
Scenario analysis is valuable because it:
Select an option first.
Correct answer: B — Helps investors prepare for multiple possible futures
Explanation: ✔ Why correct: Scenarios help investors understand and plan for different risk paths. Wrong: A, C, D: Not accurate.
Question 1047
Signposts help investors by:
Select an option first.
Correct answer: B — Indicating when a risk is rising or falling in likelihood
Explanation: ✔ Why correct: Signposts track changes in risk conditions and guide action. Wrong: A, C, D: Incorrect.
Question 1048
A key benefit of international trade is:
Select an option first.
Correct answer: C — More efficient resource allocation
Explanation: ✔ Why correct: Trade shifts production toward goods produced more efficiently. ✘ Why others wrong: A, B, D: Opposite of trade benefits.
Question 1049
Gains from exchange occur when:
Select an option first.
Correct answer: B — Countries buy imports at lower cost than producing domestically
Explanation: ✔ Why correct: Importing cheaper goods increases welfare. Wrong: A, C, D: Not gains from exchange.
Question 1050
Trade increases overall welfare because:
Select an option first.
Correct answer: B — Winners could theoretically compensate losers
Explanation: ✔ Why correct: Total welfare rises even if distribution is uneven. Wrong: A, C, D: Too narrow or incorrect.
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