RIA Economic & Financial 2

Question 1

Which economic indicator is considered a leading indicator of future economic activity?

Accepted Answer

Building permits issued

Answer

Building permits are a leading indicator because they signal future construction activity before it occurs.

Question 2

The yield curve inverts when:

Accepted Answer

Short-term rates exceed long-term rates

Answer

An inverted yield curve occurs when short-term interest rates are higher than long-term rates, often signaling recession.

Question 3

What does a P/E ratio measure?

Accepted Answer

Price relative to earnings

Answer

The Price-to-Earnings ratio measures how much investors pay for each dollar of earnings.

Question 4

Stagflation is characterized by:

Accepted Answer

High inflation and high unemployment

Answer

Stagflation combines stagnant economic growth with high inflation and unemployment.

Question 5

Which type of risk cannot be eliminated through diversification?

Accepted Answer

Systematic risk

Answer

Systematic risk (market risk) affects the entire market and cannot be diversified away.

(RIA) Registered Investment Advisor Practice Test