CFA Practice Question

There are 136 practice questions for this study session.

CFA Practice Question

Which factors can cause the neutral policy rate to change?

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.

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