Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

What defines economic infrastructure?

1. Assets used for recreation and leisure.

2. Assets that generate revenue with end users paying for the services they provide.

3. Assets strictly controlled by governmental policies.

4. Assets that require high maintenance but do not generate revenue.

The correct answer is: Assets that generate revenue with end users paying for the services they provide.

Economic infrastructure refers to the foundational physical systems and assets that support the functioning of an economy and are vital for its growth and operation. The correct choice emphasizes the characteristics of these assets, specifically that they generate revenue, with end users paying for the services they provide. This reflects the primary function of economic infrastructure, which is to enhance productivity and facilitate the functioning of businesses and various sectors within the economy. Revenue generation indicates that these assets, such as transportation networks, utilities, and communication systems, are not only essential for societal functioning but also operate on a business-like model where users contribute financially for their usage. This user payment system underlines the sustainability and viability of infrastructure projects, encouraging investment and maintenance. In contrast, the other choices do not adequately capture the essence of economic infrastructure. Options that focus on recreational use, strict governmental control without revenue generation, or high maintenance without financial returns do not align with the primary economic role that infrastructure serves in supporting economic activity and generating income. Thus, the identification of economic infrastructure as revenue-generating assets provides a clearer understanding of its definition and importance in the economy.