Economic Analysis & Indicators Flashcards
7 cards from real CFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Economic Analysis & Indicators flashcards as text
Which of the following best describes 'stagflation' and which economic framework struggled most to explain it?
Answer: High inflation combined with high unemployment; traditional Keynesian demand-side models
Stagflation (1970s) combined rising prices with rising unemployment, contradicting the traditional Phillips Curve trade-off central to Keynesian economics.
In national income accounting, Gross National Income (GNI) differs from GDP in that GNI:
Answer: Adds net income earned by residents abroad and subtracts income earned by foreigners domestically
GNI = GDP + income received by residents from abroad − income paid to foreign residents, capturing the nationality rather than geographic basis of income.
The 'neutral rate of interest' (r*) is best defined as:
Answer: The real short-term interest rate consistent with full employment and stable inflation in the long run
The neutral rate is the theoretical equilibrium real rate where monetary policy is neither expansionary nor contractionary given an economy at potential.
According to the expenditure approach to measuring GDP, which formula is correct?
Answer: GDP = C + I + G + (X - M)
The expenditure approach sums consumption (C), investment (I), government spending (G), and net exports (X−M) to arrive at GDP.
A central bank adopting a Taylor Rule sets its policy rate based primarily on:
Answer: Deviations of inflation from target and deviations of output from potential
The Taylor Rule prescribes a policy rate as a function of the neutral rate plus adjustments for the inflation gap and the output (or unemployment) gap.
Which of the following is an example of an automatic fiscal stabilizer?
Answer: Unemployment insurance benefits that rise automatically during recessions
Automatic stabilizers like unemployment insurance expand spending without new legislation during downturns, cushioning the economic cycle.
The 'J-curve effect' in international economics describes:
Answer: A trade balance that worsens immediately after currency depreciation before later improving
Short-term import prices rise faster than export volumes adjust after depreciation, initially widening the trade deficit before competitiveness gains improve it.