CFM Financial Markets & Economic Indicators 2

Question 1

Which economic indicator measures the average change in prices paid by urban consumers for a basket of goods and services?

Accepted Answer

Consumer Price Index (CPI)

Answer

The CPI tracks price changes for a fixed basket of goods and services purchased by urban consumers, making it the primary measure of consumer inflation in the US.

Question 2

In the context of bond markets, what happens to bond prices when interest rates rise?

Accepted Answer

Bond prices fall

Answer

Bond prices and interest rates move inversely; when rates rise, existing bonds with lower coupon rates become less attractive, causing their prices to decline.

Question 3

Which market structure is characterized by many buyers and sellers trading standardized contracts for future delivery of commodities or financial instruments?

Accepted Answer

Futures exchange

Answer

Futures exchanges, such as the CME Group, facilitate trading of standardized futures contracts with centralized clearing and price discovery.

Question 4

The yield curve is considered 'inverted' when:

Accepted Answer

Short-term yields exceed long-term yields

Answer

An inverted yield curve occurs when short-term interest rates are higher than long-term rates, historically considered a reliable recession predictor.

Question 5

Which Federal Reserve tool involves buying or selling government securities to influence the money supply and interest rates?

Accepted Answer

Open market operations

Answer

Open market operations (OMOs) are the Fed's primary monetary policy tool, conducted by the FOMC through buying or selling Treasury securities to expand or contract the money supply.

(CFM) Certified Fund Manager Practice Test

(CFM) Certified Fund Manager Practice Test

CFM Financial Markets & Economic Indicators 2