Economics CFA Chartered Financial Analyst Level 1 Questions with Correct Answers.

Money multiplier Correct Answer 1/reserve requirement Macroeconomic equilibrium Correct Answer where the IS and LM curves intersect. IS curve shows equilibrium between income and expenditure. LM curve shows equilibrium between the real money supply and the real interest rate M/P Correct Answer the money supply National income Correct Answer the total value of all income in a nation (wages and profits and interest and rents and pension payments) during a given period (usually 1 yr) GDP deflator Correct Answer nominal GDP/real GDP X 100 Neoclassical Correct Answer shifts in AD and AS are driven by changes in technology over time Keynesian Correct Answer shifts in AD are due to changes in expectations Narrow money Correct Answer the amount of notes (currency) and coins in circulation in an economy plus balances in checkable bank deposits Broad money Correct Answer narrow money plus any amount available in liquid assets National income Correct Answer wages and benefits + corporate and gov't enterprise before taxes + interest income + unincorporated business net income + rent + indirect business taxes - subsides Personal income Correct Answer national income + transfer payments to households (welfare) - indirect business taxes - corporate income taxes - undistributed corporate profits Fiscal multiplier Correct Answer 1/[1-(MPC(1-t)] Absolute advantage Correct Answer if a country can produce a good at lower cost in terms of resources than that of another country Comparative advantage Correct Answer an advantage for a country if it can produce a good with less opportunity cost