- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 37. Economics and Investment Markets
- Subject 2. Default-Free Interest Rates and Economic Growth
CFA Practice Question
The willingness of investors to substitute future wealth for current consumption is ______ related to the change in real GDP growth.
B. inversely
C. not
A. positively
B. inversely
C. not
Correct Answer: B
User Contributed Comments 4
| User | Comment |
|---|---|
| thebkr777 | Anyone can explain more? I'm getting confused somehow |
| akirchner1 | I'll give this a try...The CFA book states that the risk free rate is positively correlated with real GDP growth. So if you have extra money on hand and you consume it on goods, you don't have that money to invest in the risk free rate. If anyone else has a better explanation, feel free to comment. |
| jjenkins7 | As GDP grows, people spend more. As GDP decreases, people save more. |
| tkn07 | If economy is expected to do well, people are less worried about future so they will save less and consume more. |