- CFA Exams
- CFA Level I Exam
- Study Session 17. Portfolio Management (2)
- Reading 46. Economics and Investment Markets
- Subject 3. The Yield Curve and the Business Cycle
CFA Practice Question
Which factors can cause the neutral policy rate to change?
II. The expected volatility of real economic growth
III. The target inflation rate
IV. The output gap
V. The expected inflation rate
I. The level of real economic growth
II. The expected volatility of real economic growth
III. The target inflation rate
IV. The output gap
V. The expected inflation rate
Correct Answer: I, II and III
The neutral policy rate = the short-term real interest rate + targeted inflation rate, when expected inflation = target inflation and the output gap is zero.
The short-term real interest rate is positively related to the level of real economic growth and the expected volatility of real economic growth.
User Contributed Comments 0
You need to log in first to add your comment.