CFA Level 1 Economics Exam || With Questions & Answers (100% Verified)
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CFA Level 1 Economics Exam || With Questions & Answers (100% Verified)
CFA Level 1 Economics Exam || With Questions & Answers (100% Verified)
Money Multiplier for a change in monetary base Formula - ANSWER - (1+c) / (d+c)
c = currency as a % of deposits
d = desired reserve ratio
Change in ...
three methods used to reduce principal agent probl
price elasticity of demand formula
income elasticity of demand
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CFA Level 1 Economics Exam || With
Questions & Answers (100% Verified)
2024
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, CFA Level 1 Economics Exam || With
Questions & Answers (100% Verified)
Money Multiplier for a change in monetary base Formula - ANSWER - (1+c) / (d+c)
c = currency as a % of deposits
d = desired reserve ratio
Change in Quantity of Money Formula - ANSWER - (Change in Quantity of Money) =
(Change in Monetary Base) x (Money Multiplier)
Equation of Exchange Formula - ANSWER - = (Money supply) x (Velocity) = GDP =
(Price) x (Real Output)
Quantity Theory of Money Formula - ANSWER - Price = M (V/Y)
What does it mean if Cross elasticity is positive - ANSWER - Two goods are
reasonable substitutes for each other
What does it mean if Price Elasticity of Demand is less than one in absolute value? -
ANSWER - Inelastic
What does it mean if Price Elasticity of Demand is greater than one in absolute
value? - ANSWER - Elastic
Normal Goods Elasticity - ANSWER - Positive Income Elasticity (greater than 1)
Total Revenue Test - ANSWER - Estimate elasticity of demand:
P Up-> R Up (Inelastic);
P Up -> D Down (Elastic)
Cross Elasticity of Substitutes- Positive or Negative - ANSWER - Positive
Income Elasticity for normal goods- Positive or Negative - ANSWER - Positive
Income Elasticity for inferior goods- Positive or Negative - ANSWER - Negative
Command System - ANSWER - A central authority determines resource allocation,
is used in centrally planned economies and is also used within firms and in the
military
Majority Rule - ANSWER - Government policies such as taxation and transfer
payments are an example of this type of resource allocation
Efficient allocation of resources - ANSWER - Marginal Benefit to society (Demand) =
Marginal Cost for the "last" unit of each good and service to be produced (Supply).
(MC = MB)
Marginal Cost Formula - ANSWER - (Change in Total Cost) / (Change in Output)
, Two Concepts of Robert Nozick's Anarchy, State, and Utopia (Symmetry) -
ANSWER - 1) Governments must recognize and protect private property; 2) Private
property must be given from one party to another only when it is voluntarily done
When demand is less elastic than supply- consumers bear higher or lower burden -
ANSWER - HIGHER
When supply is less elastic than demand- consumers bear higher or lower burden -
ANSWER - LOWER, suppliers will bear a higher burden
Inelastic means more or less DWL - ANSWER - Less
Three Constraints to Profit Maximization - ANSWER - TMI 1) Technological, 2)
Informational, 3) Market Constraints
Technological Efficiency - ANSWER - Output from least inputs
Economic Efficiency - ANSWER - Output from least cost
Two ways that firms can organize production - ANSWER - CI 1) Command System,
2) Incentive System
Command Systems - ANSWER - Organization according to a managerial chain of
command, eg US Military [Told what to do]
Incentive System - ANSWER - Senior mangement creates a system of rewards
intended to motivate workers to perform in such a way as to maximize profits
[Motivated to do]
Principal- Agent Problem - ANSWER - Problems that arise when incentives and
motivations or managers and workers (Agents) are not the same as the incentives
and motivations of their firms.
Three Methods used to reduce Principal-Agent Problem - ANSWER - OIL 1)
Ownership, 2) Incentive Pay, 3) Long-term contracts
Three Types of Business Organizations - ANSWER - PPC 1) Proprietorships, 2)
Partnerships, 3) Corporations
Four Types of Economic Markets - ANSWER - PMOM 1) Perfect Competition, 2)
Monopolitic Competition, 3) Oligopoly, 4) Monopoly
Price Elasticity of Demand Formula - ANSWER - (% Change in Quantity Demanded)
/ (%t Change in Price)
Cross Elasticity of Demand Formula - ANSWER - (% Change in Quantity
Demanded) / (% Change in Price of Substitute or Complement)
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