Chartered Financial Analyst (CFA) Practice Exam Level 2

Regulators of financial markets are primarily responsible for what task?

1. Reducing inflation

2. Maintaining market efficiency

3. Setting interest rates

4. Managing currency exchange rates

The correct answer is: Maintaining market efficiency

Regulators of financial markets are primarily focused on maintaining market efficiency, which involves ensuring that markets operate fairly, transparently, and competitively. Efficient markets are characterized by the quick incorporation of information into prices, allowing investors to make informed decisions based on available data. This efficiency fosters investor confidence and promotes overall economic stability. While reducing inflation, setting interest rates, and managing currency exchange rates are important economic tasks, they typically fall under the purview of central banks and monetary authorities rather than financial market regulators. These institutions focus on monetary policy, aiming to influence the economy through tools such as interest rates and money supply, while financial market regulators concentrate on safeguarding the integrity of the markets themselves, protecting investors, and promoting transparency.