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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 1381
Classical cycles measure fluctuations in:
Select an option first.
Correct answer: C — Level of economic activity
Explanation: ✔ Why correct: Classical cycles track absolute levels of activity.
Question 1382
A limitation of the classical cycle is that:
Select an option first.
Correct answer: C — It does not separate long-term trends from short-term fluctuations
Explanation: ✔ Why correct: Classical cycles do not distinguish trend vs. cycle.
Question 1383
The growth cycle focuses on fluctuations:
Select an option first.
Correct answer: C — Around long-term trend growth
Explanation: ✔ Why correct: Growth cycles measure deviations from trend output.
Question 1384
Growth cycle peaks occur:
Select an option first.
Correct answer: A — Earlier than classical cycle peaks
Explanation: ✔ Why correct: Growth cycle peaks generally appear earlier.
Question 1385
The growth rate cycle focuses on fluctuations in:
Select an option first.
Correct answer: C — GDP growth rate
Explanation: ✔ Why correct: It tracks changes in the rate of growth.
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Question 1386
A key advantage of the growth rate cycle is:
Select an option first.
Correct answer: D — It does not require estimating long-run trend
Explanation: ✔ Why correct: Growth rate cycles avoid trend estimation.
Question 1387
In the recovery phase, actual output is:
Select an option first.
Correct answer: B — At its lowest relative to potential
Explanation: ✔ Why correct: Recovery begins at the trough.
Question 1388
During recovery, economic activity:
Select an option first.
Correct answer: D — Begins to increase
Explanation: ✔ Why correct: Recovery means activity starts rising.
Question 1389
During expansion, actual output:
Select an option first.
Correct answer: C — Rises above potential
Explanation: ✔ Why correct: Expansion pushes output above potential.
Question 1390
A boom phase is characterized by:
Select an option first.
Correct answer: B — Output above potential
Explanation: ✔ Why correct: Booms occur when output exceeds potential.
Question 1391
During slowdown, the output gap:
Select an option first.
Correct answer: B — Starts to narrow
Explanation: ✔ Why correct: Slowdown begins when the positive gap narrows.
Question 1392
During slowdown, growth is:
Select an option first.
Correct answer: C — Decelerating
Explanation: ✔ Why correct: Growth slows but may remain positive.
Question 1393
During contraction, actual output:
Select an option first.
Correct answer: C — Falls below potential
Explanation: ✔ Why correct: Contraction creates a negative output gap.
Question 1394
A recession occurs when:
Select an option first.
Correct answer: D — Output declines significantly
Explanation: ✔ Why correct: Recession = falling economic activity.
Question 1395
In recovery, employment:
Select an option first.
Correct answer: C — Remains high but stabilizes
Explanation: ✔ Why correct: Layoffs slow first; hiring lags.
Question 1396
In expansion, companies:
Select an option first.
Correct answer: C — Increase hiring and investment
Explanation: ✔ Why correct: Expansion boosts hiring and investment.
Question 1397
In slowdown, companies often:
Select an option first.
Correct answer: D — Rely on overtime instead of new hires
Explanation: ✔ Why correct: Firms hesitate to hire during slowdown.
Question 1398
In contraction, companies first:
Select an option first.
Correct answer: C — Cut hours and overtime
Explanation: ✔ Why correct: Cutting hours precedes layoffs.
Question 1399
Inflation during recovery is:
Select an option first.
Correct answer: D — Moderate
Explanation: ✔ Why correct: Early recovery is not strongly inflationary.
Question 1400
Inflation during expansion:
Select an option first.
Correct answer: A — Picks up modestly
Explanation: ✔ Why correct: Demand strengthens, raising inflation.
Question 1401
Inflation during slowdown:
Select an option first.
Correct answer: C — Decelerates
Explanation: ✔ Why correct: Inflation slows as demand cools.
Question 1402
Inflation during contraction:
Select an option first.
Correct answer: B — Decelerates with a lag
Explanation: ✔ Why correct: Prices adjust slowly downward.
Question 1403
Leads and lags occur because:
Select an option first.
Correct answer: C — Firms wait for confirmation before hiring
Explanation: ✔ Why correct: Businesses are cautious early in recovery.
Question 1404
Equity markets typically bottom:
Select an option first.
Correct answer: A — Before the economy
Explanation: ✔ Why correct: Equity markets are leading indicators.
Question 1405
During early recovery, risky assets:
Select an option first.
Correct answer: D — Are repriced upward
Explanation: ✔ Why correct: Markets anticipate higher profits.
Question 1406
During a boom, companies may:
Select an option first.
Correct answer: C — Struggle to find workers
Explanation: ✔ Why correct: Labor shortages occur in booms.
Question 1407
During a boom, central banks may:
Select an option first.
Correct answer: D — Intervene to prevent overheating
Explanation: ✔ Why correct: Authorities tighten policy to cool the economy.
Question 1408
During slowdown, risky assets:
Select an option first.
Correct answer: B — Often decline
Explanation: ✔ Why correct: Risky assets fall after booming.
Question 1409
During slowdown, government bond yields:
Select an option first.
Correct answer: D — Rise
Explanation: ✔ Why correct: Bond prices fall and yields rise due to inflation fears.
Question 1410
Business cycles do NOT occur in:
Select an option first.
Correct answer: D — Centrally planned economies
Explanation: ✔ Why correct: Centrally planned economies lack typical cycles.
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