Chartered Financial Analyst Level I Economics

1.Adele sells bread where the law caps a loaf at 3 dollars. Customers would pay 5 dollars, and at the cap they want more loaves than bakeries will bake. What does that ceiling produce?

2.Boris grows rice where the support price is 8 dollars a sack and buyers will pay only 6. At 8 dollars, farms bring more rice than buyers take. What does that floor produce?

3.Chioma cuts her cafe's cup price by 10 percent, and visits rise by 15 percent. What happens to her revenue from cups?

4.Diego's commuter ferry raises fares 10 percent, and rides fall 4 percent. What happens to fare revenue?

5.Eleni sells tea. When the coffee shop next door raises its price, her tea sales rise, and the cross-price elasticity is positive. What does that sign say about tea and coffee?

6.Farid sells printers. A drop in the price of ink raises the number of printers he sells. What does that response show?

7.Greta runs a dining room. When neighborhood incomes rise, her meal sales rise, and the income elasticity is positive. What kind of good are the meals?

8.Hiroshi runs a basic bus pass. Incomes in his city rise 10 percent and pass sales fall 3 percent. What is the income elasticity, and what kind of good is the pass?

9.Ingrid's wheat farm sells grain identical to thousands of other farms, and she cannot set the exchange price. What role does her farm have?

10.Jamal's firm is the only seller of a drug still under patent. Buyers take fewer doses when he raises the price. What does that downward-sloping demand show?

11.Keiko's airline is one of four carriers on a busy route. When she cuts a fare, the other three match it within a day. What structure fits that reaction?

12.Leila's city has many restaurants, menus differ a little, and new kitchens can open freely. In the long run, what happens to economic profit and to price versus marginal cost?

13.Mateo totals one country's accounts: consumption 70, investment 20, government 15, exports 8, and imports 13. What is expenditure GDP?

14.Nadia measures nominal GDP at 110 while the price index is 1.10. What is real GDP?

15.Oscar tracks a price index that moves from 200 to 220. What is the inflation rate over that move?

16.Petra quit a bookkeeping job last week and is interviewing for another bookkeeping job in the same city. Her skills match the openings. What kind of unemployment is she in?

17.Quentin trained as a typesetter. Local printers now use software, and shops no longer hire that skill, though he is still looking. What kind of unemployment is this?

18.Rosa's factory cut her shift because orders collapsed in a recession. The plant expects to recall her when orders return. What kind of unemployment is this?

19.Soren must tell a labor ministry which kinds of unemployment sit inside the natural rate in a normal year. What does he include?

20.Talia, the budget minister, raises spending on roads and leaves tax revenue unchanged. What policy move is that?

21.Ulrich's central bank sells securities and drains reserves from the banking system. What policy is that sale?

22.Valentina, the treasurer, watches the bond yield rise the week a larger deficit is announced, and firms postpone some plant projects. What is that rate effect?

23.Willem, a tailor, needs 2 hours for a shirt and 6 for a dress. The shop beside him needs 4 hours for a shirt and 8 for a dress. Who should specialize in dresses?

24.Ximena and a coworker share the same tools and the same eight-hour day. Ximena finishes 8 stools, and the coworker finishes 5. What does Ximena have in stools?

25.Yara imports parts priced in euros. The rate moves from 1.10 dollars per euro to 1.25 dollars per euro. What has happened to the dollar, and to her dollar cost?

26.Zeke prices one basket at 100 dollars at home and 80 euros abroad. What dollar-per-euro rate does purchasing-power parity imply?

27.Amara sees money growth of 6 percent, real output growth of 2 percent, and steady velocity. About what inflation rate does the quantity equation give?

28.Bruno advises a central bank that hopes to hold unemployment permanently below the natural rate by accepting permanently higher inflation. What does the long-run Phillips curve say?

29.Celeste's country enters a recession. Tax receipts fall and benefit payments rise, and no new statute was passed. What is operating?

30.Dario uses a simple model with a marginal propensity to consume of 0.9 and no tax or import leakages. What is the spending multiplier?

31.Esme's country imports more than it exports, so the current account is in deficit, and official reserves are unchanged. What else must happen?

32.Fatima, a purchasing manager, watches building permits and new orders before she sees output move. How should she treat those two series?

33.Gio sees factories already cutting shifts. The unemployment rate then rises and confirms the downturn. How does that rate sit relative to the turn?

34.Hana adds cooks to a kitchen whose ovens and counters stay fixed. The extra meals per new cook eventually shrink. What is she seeing?

35.Idris runs a bakery where the price is 5, average variable cost is 6, and average total cost is 8. What should he do in the short run?

36.Jules runs a bakery where the price is 7, average variable cost is 6, and average total cost is 8. What should Jules do in the short run?

37.Kofi drives to work, and a fuel tax is added. Commuters keep buying nearly the same amount of fuel. Who bears most of that tax?

38.Lila sells a luxury coat with many close substitutes. A tax is placed on the coat, and buyers readily switch away. Who bears most of that tax?

39.Marco's income is unchanged, the price of fish rises, and the price of rice does not. What happens to his budget line?

40.Noor's last dollar on fruit buys more extra utility than her last dollar on cake, and she can still shift spending. What should she buy to raise total utility?

41.Pavel's trade sets a minimum wage above the wage that would clear the market. More people apply than firms want to hire at that wage. What does the floor create?

42.Quinn measures output at 980 and potential output at 1,000. What is the output gap?

43.Ravi's central bank cuts the policy rate. Borrowing costs fall, household spending firms up, and the currency weakens. What chain is that?

44.Saskia watches foreign funds buy her country's bonds after the policy rate rises. Other things stay equal. What happens to the currency?

45.Tomas's government cuts imports with a quota and awards the import licenses to domestic importers. Who receives the quota rent?

46.Uma divides a country's GDP of 200 by its population of 2. What does that quotient measure?

47.Viktor's factory turns out more units with the same crew after a process change. If that productivity gain spreads, what happens to potential output?

48.Willa's central bank follows a rule that lifts the policy rate by more than any rise in expected inflation. Expected inflation moves up. What happens to the real policy rate?

49.Youssef's households try to save more during a slump, and investment does not rise to match. In the simple short-run story, what happens to income?

50.Zara's region loses its mill jobs, and the displaced workers' skills do not match the clinics that are hiring. Demand is otherwise normal. What happens to the natural rate?

51.Anika's bank approves a loan and credits the borrower's deposit for the same amount. What did that booking do?

52.Bodhi borrowed a fixed nominal sum. Prices then fall unexpectedly, and his money income is weaker. Who is hurt in real terms?

53.Carmen's central bank sees inflation above target and does not tighten. Households mark their inflation expectations up. What can happen to that higher inflation?

54.Darius advises a small country that pegs its currency and lets capital move freely. He wants to support demand. Which instrument can he still use for that?

55.Elsa will receive euros in three months and wants dollars. The forward price of the euro, in dollars, is above the weaker spot she fears. What does she sell forward?

56.Felix compares a domestic interest rate of 2 percent with a foreign rate of 5 percent, and covered interest parity holds. Where is the foreign currency's forward price in domestic currency?

57.Gianna's city taxes a good, and fewer units are sold. Units that buyers valued above the cost of making them are no longer produced. What does that lost output create?

58.Hassan keeps a harbor light. One ship's use does not use the beam up, and passing ships are hard to charge. What kind of good is the light?

59.Imani's mill dumps waste that downstream users must live with. The mill counts its own costs and not those downstream costs. What is wrong with the private amount produced?

60.Jonas's clinic sells a vaccine. Each shot also protects neighbors, but buyers pay only for their own protection. What does the market provide relative to the social amount?

61.Kira's central bank surprises markets with a larger money supply, and many prices are still printed at the old level. What can happen to output at first?

62.Lorenzo's economy is producing above potential. Orders are hard to fill, and overtime is common. What pressure does that put on inflation?

63.Mei buys more of a brand that became cheaper and less of one that became dearer. The consumer price index still weights the old basket. What bias does that create in the cost of living?

64.Nico's country imports all of its oil, and the oil price jumps. Consumer prices include that oil. The GDP deflator prices domestic production. Which index moves less?

65.Odette lends to a firm. The firm's default risk rises, so she charges more above the government yield than she did last month. What has happened to the credit spread?

66.Paolo's country runs a currency board that exchanges domestic currency for the anchor at a fixed rate and holds anchor-currency reserves. What does the board give up?

67.Rhea's firms expect higher inflation and build it into wages and other costs. What happens to short-run aggregate supply?

68.Samir's central bank announces a lower inflation goal, and wage setters believe it, so wage demands ease with the announcement. How does the output loss compare with a disbelieved plan?

69.Thea stops looking for work after months of rejection. She still wants a job but is not searching, and the measured unemployment rate falls that month. What happened to her in the measure?

70.Ugo's output is 2 percent below potential. A local rule of thumb says a 2 percent output gap lines up with about 1 percentage point of extra unemployment. Where is unemployment relative to the natural rate?

71.Vera compares two simple models. In one of them, less of each new dollar leaks into saving, taxes, or imports. What is true of the spending multiplier there?

72.Wesley exports machines. A large copper discovery in his country lifts the currency, and foreign buyers cancel some machine orders. What squeezed those export sales?

73.Xia studies a long slump. Workers who were idle for years lost skills, and the natural rate is higher afterward than it was before. What is that lasting damage called?

74.Yasmin's competitive firm produces in the short run only when price covers average variable cost. Which curve is her short-run supply?

75.Zola's industry can add firms without bidding up input prices. Entrants produce at the same cost as the firms already in. What does long-run supply look like?

76.Anders's industry uses a scarce local ore. When more firms enter, the ore price rises and every firm's cost rises. What does long-run supply do?

77.Bianca would pay 12 for a ticket and pays 8. What is her consumer surplus on that ticket?

78.Casper's cost of one unit is 5, and he receives 8 for it. What is his producer surplus on that unit?

79.Delia compares two markets facing the same tax per unit. In one, both supply and demand are more elastic. Where is the deadweight loss larger?

80.Emil's city subsidizes a good until more units are sold than the point where marginal cost equals marginal value. What does that extra output create?

81.Freya's wage bargain already includes the inflation workers expected. Actual inflation comes in higher than that. Which part of inflation moves output?

82.Gita holds less cash when inflation is high and makes more trips to the bank to shift money into an interest-bearing account. What cost of inflation is that?

83.Henrik's country keeps a fixed exchange rate and lets capital move freely. It cannot keep every open-economy goal at once. Which goal does this pair give up?

84.Isla's messaging service is more useful to each person when more friends join, and a rival with few users is hard to start. What feature is that?

85.Jiro prices below his cost until a rival exits, then raises the price once he is alone. A separate week-long sale at his shop stayed above cost. Which episode is predatory pricing?

86.Kamal sells the same seat at a lower fare to students than to other travelers. The cost of the seat is the same, and tickets cannot be resold. What pricing is that?

87.Lotte sees a drought lift food prices while energy prices stay calm. Headline inflation jumps, and the index that leaves out food and energy barely moves. Which index barely moved?

88.Malik uses a marginal propensity to consume of 0.6 and ignores other leakages. What is the spending multiplier?

89.Nia's government raises spending by 10 and raises taxes by 10 at the same time. In the simple model, what happens to income?

90.Omar sells exports, and a recession abroad cuts his foreign orders. Domestic tax and spending policy did not change. What happens to demand at home?

91.Priyanka's currency depreciates. Import prices in domestic currency rise at once, while export and import volumes take months to adjust. What can happen to the trade balance at first?

92.Rafael asks when a depreciation will improve the trade balance once export and import volumes have adjusted. What must be true of those demands?

93.Selene delays reprinting her cafe menus after costs rise, so posted prices stay at last month's figures for a while. Why are those prices sticky?

94.Tariq had been reading inflation off money growth under an assumption that velocity is stable. Velocity then jumps. What still holds, and what was the extra assumption?

95.Ursula at the finance ministry covers part of the deficit by issuing new money rather than by taxing or borrowing from the public. What does the government gain that way?

96.Vinay sees expected inflation rise by 1 percentage point, and the real interest rate is unchanged. About how much does the nominal interest rate rise?

97.Wren's nominal policy rate is near zero. The central bank adds reserves, and the rate does not fall further. Bond purchases may not stimulate through the usual rate channel. What setting is this?

98.Yuki's bank posts a high loan rate. The applicants most eager to borrow at that rate are the ones whose projects are most likely to fail. When does this problem show up?

99.Zain signs a business loan, then switches the money into a riskier project than the one on the application. The bank cannot watch the project day to day. When does this problem show up?

100.Aisha's bank can pay every depositor if they withdraw over time, but a rumor says others will withdraw today, and a line forms. What can the run force even though the bank was solvent?

101.Benoit's export price index is 110 and his import price index is 100. What is the terms-of-trade index, and what does a rise in it mean?

102.Clara's country has been financing a trade gap with foreign loans. Lenders then refuse to roll those loans over. What has disappeared?

103.Declan's central bank buys foreign currency and, in the same operation, sells domestic securities so the money supply does not rise. What kind of intervention is that?

104.Esteban's central bank buys foreign currency and does not sell domestic securities to offset the purchase. What happens to the money supply?

105.Fiona's domestic price index rises, the foreign price index is unchanged, and the nominal exchange rate is unchanged. What has the real exchange rate done?

106.Gustavo's real exchange rate depreciates, so his country's goods are cheaper relative to foreign goods. After buyers have time to switch, what tends to happen to net exports?

107.Helene's clinic sends nurses to a course. The same nurses then see more patients per hour. What did the course add?

108.Ivan, a planner, raises the saving rate and expects output per worker to grow faster forever from that change alone. What does the Solow model say about that long-run growth rate?