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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 1891
Countries with strong institutions act more effectively internationally because:
Select an option first.
Correct answer: B — They have rule of law, accountability, and property rights
Explanation: ✔ Why correct: Strong institutions enhance credibility and stability in global affairs. Wrong: A, C, D: Not true.
Question 1892
Comparative advantage arises because countries differ in:
Select an option first.
Correct answer: B — Resource endowments and technological capabilities
Explanation: ✔ Why correct: Comparative advantage is based on differing factors and technologies. ✘ Why others wrong: A, C, D: Not the core drivers.
Question 1893
Ghana’s economy illustrates comparative advantage because it:
Select an option first.
Correct answer: B — Has resources but relies on others for processing
Explanation: ✔ Why correct: Ghana exports raw resources but depends on others for processing. ✘ Why others wrong: A, C, D: Incorrect.
Question 1894
Specialization and exchange lead to:
Select an option first.
Correct answer: B — Greater economies of scale
Explanation: ✔ Why correct: Specialization increases scale and efficiency. Wrong: A, C, D: Opposite.
Question 1895
Geopolitical risk can tilt comparative advantage by:
Select an option first.
Correct answer: B — Attracting or repelling labor and capital
Explanation: ✔ Why correct: Low-risk regions attract investment; high-risk regions lose it. Wrong: A, C, D: Not mechanisms.
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Question 1896
Higher geopolitical risk generally leads investors to:
Select an option first.
Correct answer: A — Require higher returns
Explanation: ✔ Why correct: More risk requires higher compensation. Wrong: B, C, D: Not rational.
Question 1897
Investors who are “takers” of geopolitical risk:
Select an option first.
Correct answer: B — Consider geopolitics only when it affects long-term attractiveness
Explanation: ✔ Why correct: They incorporate geopolitics only when relevant to long-term views. Wrong: A, C, D: Not accurate.
Question 1898
Investors who treat geopolitics as a core input:
Select an option first.
Correct answer: B — Use geopolitical analysis to generate alpha
Explanation: ✔ Why correct: They actively monitor geopolitical dislocations for opportunities. Wrong: A, C, D: Opposite.
Question 1899
Event risk is defined as:
Select an option first.
Correct answer: B — A risk tied to a known date
Explanation: ✔ Why correct: Event risks revolve around scheduled events like elections. Wrong: A, C, D: Other categories.
Question 1900
Brexit was an example of:
Select an option first.
Correct answer: A — Event risk
Explanation: ✔ Why correct: The referendum date was known in advance. Wrong: B, C, D: Not correct.
Question 1901
Predictability of an event:
Select an option first.
Correct answer: B — Does not change its speed or size of impact
Explanation: ✔ Why correct: Known events can still have large, fast impacts. Wrong: A, C, D: False.
Question 1902
Exogenous risk refers to:
Select an option first.
Correct answer: B — Sudden, unanticipated shocks
Explanation: ✔ Why correct: Exogenous risks include uprisings, invasions, disasters. Wrong: A, C, D: Not exogenous.
Question 1903
The 2011 Japan earthquake was an example of:
Select an option first.
Correct answer: B — Exogenous risk
Explanation: ✔ Why correct: It was sudden and unpredictable. Wrong: A, C, D: Incorrect.
Question 1904
Thematic risks:
Select an option first.
Correct answer: B — Evolve over long periods
Explanation: ✔ Why correct: They develop gradually, like climate change or cyber threats. Wrong: A, C, D: Not accurate.
Question 1905
Cyber threats are considered:
Select an option first.
Correct answer: C — Thematic risks
Explanation: ✔ Why correct: Cyber risks grow over time and increase in scale. Wrong: A, B, D: Not correct.
Question 1906
Cyberattacks have increased because:
Select an option first.
Correct answer: B — Internet and computer use expanded
Explanation: ✔ Why correct: More digital activity increases exposure. Wrong: A, C, D: False.
Question 1907
Assessing geopolitical risk involves evaluating:
Select an option first.
Correct answer: B — Likelihood, velocity, and impact
Explanation: ✔ Why correct: All three dimensions matter. Wrong: A, C, D: Incomplete.
Question 1908
Likelihood refers to:
Select an option first.
Correct answer: B — Probability of occurrence
Explanation: ✔ Why correct: Likelihood = probability. Wrong: A, C, D: Not definitions.
Question 1909
Measuring likelihood is difficult because:
Select an option first.
Correct answer: B — Risks evolve unpredictably with many actors
Explanation: ✔ Why correct: Motivations and timing are complex. Wrong: A, C, D: Not true.
Question 1910
Highly globalized countries are:
Select an option first.
Correct answer: B — Less likely to experience geopolitical risk but more exposed to spillovers
Explanation: ✔ Why correct: Cooperation reduces direct risk but increases exposure to partners’ risks. Wrong: A, C, D: Incorrect.
Question 1911
Velocity refers to:
Select an option first.
Correct answer: B — Speed of impact
Explanation: ✔ Why correct: Velocity = how fast the risk affects portfolios. Wrong: A, C, D: Not definitions.
Question 1912
High-velocity risks often cause:
Select an option first.
Correct answer: B — Immediate market volatility
Explanation: ✔ Why correct: Sudden shocks trigger rapid price movements. Wrong: A, C, D: Not accurate.
Question 1913
A black swan event is:
Select an option first.
Correct answer: B — Rare and hard to predict but impactful
Explanation: ✔ Why correct: Black swans are rare, unpredictable, and significant. Wrong: A, C, D: Incorrect.
Question 1914
Medium-term risks often:
Select an option first.
Correct answer: B — Impair processes, costs, and opportunities
Explanation: ✔ Why correct: They influence operations and valuations. Wrong: A, C, D: Not correct.
Question 1915
Long-term risks often affect:
Select an option first.
Correct answer: A — ESG factors and asset allocation
Explanation: ✔ Why correct: Long-term risks shape structural investment decisions. Wrong: B, C, D: Too narrow.
Question 1916
Impact refers to:
Select an option first.
Correct answer: B — Magnitude and nature of portfolio effects
Explanation: ✔ Why correct: Impact = size and breadth of consequences. Wrong: A, C, D: Not definitions.
Question 1917
Impact can be:
Select an option first.
Correct answer: C — Discrete or broad
Explanation: ✔ Why correct: Some risks hit one firm; others hit entire markets. Wrong: A, B, D: Too narrow.
Question 1918
Cyber risks can have:
Select an option first.
Correct answer: C — Both discrete and broad impacts
Explanation: ✔ Why correct: They can hit one firm or raise costs for all. Wrong: A, B, D: Incomplete.
Question 1919
A low-impact but high-likelihood risk:
Select an option first.
Correct answer: B — May not merit deep attention
Explanation: ✔ Why correct: High likelihood but small impact may not justify resources. Wrong: A, C, D: Not accurate.
Question 1920
A high-impact but low-likelihood risk:
Select an option first.
Correct answer: B — May merit scenario planning
Explanation: ✔ Why correct: Low likelihood but large consequences justify planning. Wrong: A, C, D: Too extreme.
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