CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

If the interest rate is falling, we can conclude that ______
A. the central bank is instituting an expansionary monetary policy.
B. the central bank is instituting a restrictive monetary policy.
C. We cannot conclude anything about the current monetary policy by looking at the interest rates.
Explanation: Interest rates are often a misleading gauge of monetary policy. For example, an unanticipated expansionary monetary policy can reduce the interest rate in the short run, but in the long run the result will be the opposite.

User Contributed Comments 12

User Comment
Yooo I Hate This Question. In the long run... oh forget it.
Eckhardt1978 in the long run, we're all dead! :-)
danlan In long run, we will all pass CFA exams.
stevelaz Hope so
tabulator Hopefuly, in the short run
whoi I would prefer short run as well.
Masterkang Dont be too impatient guys
SalmaM We gotta hope for passing in the short run.
nayra please explain me as i am fustrated to think
gazman1984 Too tough. just remember it if it comes up!
Shaan23 Guys. It doesnt say the FED or something initiated the change in interest rates. It just says that interest rates are falling. That could mean a bunch of things and doesnt have to mean that there is a monetary policy in place.
Kevdharr Yeah but at the same time, I could see myself selecting C and then the answer being A and the explanation saying "Declining interest rates often are an indication of expansionary monetary policy" or some jazz like that.
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