Exeter Asset Management Case Scenario and Economic Shocks

CFA Level III
#1

Standish next reviews recent political news and discovers:

  • The Czech Republic is holding elections next month. The KSCM party is projected to gain a majority, with a proposal to significantly reduce tax rates.
  • The Swiss government is considering imposing a tax on all non-resident bank accounts.
  • Sweden has reduced the use of oil to less than 25% of its energy supply, due to concerns about oil price instability

From Standish’s review of political news, he can reasonably conclude that the country that is least likely to experience a macroeconomic shock is:

  1. Sweden.
  2. Switzerland.
  3. Czech Republic.

The answer is A, but I feel it should be C
Like in the book it says that the reduction of the important supply of commodities causes reduction in economic growth. Why are we choosing A then?

#2

I think the reason is because the Czech Republic and Swiss events are yet to happen but Sweden’s 25% reduction of oil is already imbedded in the markets and will not create a shock.

If the KSCM party is elected Czech it will create a macroeconomic shock