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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 1921
Scenario analysis helps investors:
Select an option first.
Correct answer: B — Evaluate portfolio outcomes under different states of the world
Explanation: ✔ Why correct: Scenarios explore alternative futures. Wrong: A, C, D: Not true.
Question 1922
Scenario analysis strengthens:
Select an option first.
Correct answer: B — Conviction in prioritization and action
Explanation: ✔ Why correct: It clarifies priorities and timing. Wrong: A, C, D: Incorrect.
Question 1923
A base case scenario describes:
Select an option first.
Correct answer: B — The most impactful and likely outcome
Explanation: ✔ Why correct: Base case = central, impactful expectation. Wrong: A, C, D: Not definitions.
Question 1924
Upside and downside scenarios help investors:
Select an option first.
Correct answer: B — Consider alternative futures
Explanation: ✔ Why correct: They broaden understanding of possible outcomes. Wrong: A, C, D: Not accurate.
Question 1925
Quantitative scenarios may involve:
Select an option first.
Correct answer: B — Measuring sensitivity to key factors
Explanation: ✔ Why correct: They test portfolios against interest rates, prices, FX, etc. Wrong: A, C, D: Not correct.
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Question 1926
Extreme-event scenarios help investors:
Select an option first.
Correct answer: B — Test portfolio resilience
Explanation: ✔ Why correct: They show how portfolios behave under stress. Wrong: A, C, D: Not accurate.
Question 1927
Groupthink in scenario analysis:
Select an option first.
Correct answer: B — Reduces creativity and independent thinking
Explanation: ✔ Why correct: Groupthink discourages diverse perspectives. Wrong: A, C, D: Incorrect.
Question 1928
Signposts are:
Select an option first.
Correct answer: B — Indicators showing a risk becoming more or less likely
Explanation: ✔ Why correct: Signposts track changes in risk likelihood, velocity, or impact. Wrong: A, C, D: Too narrow.
Question 1929
A “green” signpost means:
Select an option first.
Correct answer: B — No action needed
Explanation: ✔ Why correct: Green = low likelihood/impact. Wrong: A, C, D: Not correct.
Question 1930
An “amber” signpost indicates:
Select an option first.
Correct answer: B — Medium risk requiring caution
Explanation: ✔ Why correct: Amber = rising risk, prepare. Wrong: A, C, D: Not accurate.
Question 1931
A “red” signpost means:
Select an option first.
Correct answer: B — Action plan may be needed
Explanation: ✔ Why correct: Red = high likelihood/impact. Wrong: A, C, D: Opposite.
Question 1932
Brexit signposts turned red when:
Select an option first.
Correct answer: B — Polls showed “leave” gaining majority
Explanation: ✔ Why correct: Polls indicated a real chance of disruptive change. Wrong: A, C, D: Not the trigger.
Question 1933
Good signposts focus on:
Select an option first.
Correct answer: B — Policy changes that affect markets
Explanation: ✔ Why correct: Policy, not politics, drives durable market effects. Wrong: A, C, D: Not reliable.
Question 1934
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 1935
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 1936
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 1937
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 1938
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.
Question 1939
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 1940
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 1941
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 1942
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 1943
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 1944
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 1945
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 1946
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 1947
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 1948
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 1949
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 1950
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.
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