Economics

In this section

• Chapter 1: Market Forces of Supply and Demand
  • Introduction to Supply and Demand
    Discover the core principles of supply and demand, how they shape market outcomes, and why they matter in finance—even for beginners.
  • Equilibrium, Surplus, and Shortage
    Discover how market equilibrium arises from the interplay of supply and demand, including how surpluses and shortages are resolved through price adjustments.
  • Consumer and Producer Surplus
    Discover how consumer and producer surplus measure net benefits in market transactions, informing cost-benefit analyses, policy decisions, and overall economic welfare.
  • Market Efficiency and Deadweight Loss
    Explore how efficient markets maximize total surplus, understand deadweight loss, and examine how taxes, subsidies, or price controls distort equilibrium leading to welfare losses. Includes diagrams, practical examples, and exam-relevant insights.
  • Elasticities (Price, Income, Cross)
    Explore how price, income, and cross-price elasticities reveal the sensitivity of demand and supply to changes in prices and income.
  • Government Intervention (Price Floors, Price Ceilings, Taxes, Subsidies)
    A deep dive into price floors, price ceilings, taxes, and subsidies, illustrating how government interventions impact equilibrium and welfare, with examples to help CFA candidates.
  • Demand and Supply Shifters
    Explore the critical distinction between movements along and shifts of demand and supply curves, examining real-world examples and portfolio implications for CFA Level I candidates.
  • Common Resources and Public Goods
    Explore the nuances of rival vs. non-rival goods, learn about policy strategies to address the tragedy of the commons and free-rider issues, and gain insights for the CFA exam.
  • Market Failures and Asymmetric Information
    Explore how imperfect information and externalities can lead to inefficient market outcomes, and learn how policy measures can sometimes mitigate these failures.
• Chapter 2: The Firm and Industry Organization
  • Cost Structures, Breakeven, and Shutdown Points
    Learn how firms analyze fixed and variable costs, find their breakeven points, and determine the shutdown condition to optimize profitability and strategic market decisions.
  • Short-Run and Long-Run Cost Curves
    Explore the distinction between short-run and long-run cost curves, economies of scale, diseconomies of scale, and constant returns to scale. Learn how these cost curves factor into capacity planning, production decisions, and technology-driven efficiency improvements.
  • Perfect Competition
    Explore how firms operate under perfect competition, focusing on short-run and long-run equilibrium, profit conditions, efficiency implications, and real-world applications.
  • Monopolistic Competition
    Explore how differentiated goods, brand loyalty, and strategic pricing define monopolistic competition, including short-run supernormal profits, long-run normal profits, and the role of excess capacity and advertising.
  • Oligopoly (Strategic Interaction and Game Theory)
    Discover how a handful of large firms shape markets through strategic interaction, game theory, and potential collusion while managing competition in oligopolistic industries.
  • Monopoly and Market Power
    Discover how monopolies form, operate, and influence markets, while exploring the pricing and welfare implications of a single, powerful market participant.
  • Efficiency and Welfare Implications of Different Market Structures
    Explore how different market structures—perfect competition, monopolistic competition, oligopoly, and monopoly—affect allocative, productive, and dynamic efficiency, as well as overall social welfare and policy interventions.
  • Industry Concentration and Market Measures
    Explore key metrics for assessing market concentration, including Concentration Ratios and the Herfindahl-Hirschman Index, and learn how they inform strategic and regulatory decisions.
  • Price Discrimination in Market Structures
    Explore how firms maximize profits through price discrimination, the conditions for successful segmentation, real-world examples, and ethical considerations.
  • Natural Monopoly and Regulation
    Explore the nature of natural monopolies, their emergence in markets such as utilities and infrastructure, and how regulation balances efficiency, price setting, and consumer protection.
  • Managerial and Behavioral Theories of the Firm
    A thorough exploration of neoclassical, managerial, and behavioral approaches to firm objectives, highlighting real-world complexities such as principal-agent conflicts, governance mechanisms, and bounded rationality.
• Chapter 3: Business Cycles
  • Measuring GDP and National Income
    A comprehensive exploration of how economists define, calculate, and interpret GDP, along with a discussion of national income and related measures for CFA candidates.
  • Real vs. Nominal GDP
    Explore the crucial differences between real and nominal GDP, learn how analysts separate inflation effects from true output growth, and understand why real GDP is central to macroeconomic assessment and investment analysis.
  • Aggregate Demand and Aggregate Supply Model
    A comprehensive exploration of how aggregate demand and aggregate supply interact to determine overall price levels and economic output, including key shifts and policy implications.
  • Short-Run vs. Long-Run Aggregate Supply
    Explore the distinction between short-run and long-run aggregate supply (SRAS vs. LRAS), the factors driving each, and their critical role in business cycles and policy decisions.
  • Phases of the Business Cycle
    Discover the four main phases of the business cycle—expansion, peak, contraction, and trough—along with their key drivers, real-world implications, and strategies for navigating cyclical fluctuations in asset allocation and investment decisions.
  • Economic Indicators (Leading, Coincident, Lagging)
    Learn about critical economic indicators that guide macroeconomic analysis and investment decisions, focusing on distinguishing leading, coincident, and lagging measures for effective forecasting and portfolio management.
  • Credit Cycles and the Role of Inventories
    Explore how credit cycles and inventory management amplify business cycle dynamics, including practical examples, diagrams, and real-world insights for CFA Level I candidates.
  • Unemployment and Output Gaps
    A detailed exploration of how unemployment rates and output gaps interact, influencing business cycles, inflationary pressures, and policy decisions.
  • Okun’s Law and Economic Growth
    Explore Okun’s Law, its implications for unemployment and GDP growth, and how this relationship guides economic policy and investment decisions.
  • Hysteresis in Unemployment
    Explore how temporary economic shocks can lead to persistently high unemployment, influencing labor market dynamics, policy interventions, and long-term economic growth.
  • Measuring Potential Output and Output Gap Approaches
    Learn advanced techniques to estimate potential GDP and gauge economic slack or overheating through output gap measures. Explore production functions, statistical filters, and structural methods for precise macroeconomic analysis and policy decisions.
  • Labor Market Dynamics (Frictional, Structural, Cyclical Unemployment)
    A thorough exploration of frictional, structural, and cyclical unemployment, highlighting root causes, measurement techniques, policy solutions, and connections to business cycle analysis.
• Chapter 4: Inflation and Deflation
  • Measuring Inflation (CPI, PPI, GDP Deflator)
    Explore how inflation is measured using the CPI, PPI, and GDP Deflator, understand their methodologies, limitations, and how they are applied in real-world economic analysis.
  • The Quantity Theory of Money
    Explore the core principles of the Quantity Theory of Money, its short-run vs. long-run implications, and how it shapes inflation and monetary policy decisions.
  • Causes and Types of Inflation (Demand‐Pull vs. Cost‐Push)
    Comprehensive coverage of the main drivers of inflation—demand and cost factors—plus wage-price spirals, imported inflation, disinflation, reflation, and their implications for both macro policy and portfolio management contexts.
  • Consequences of Inflation and Deflation
    Explore how inflation and deflation affect economies, market participants, and capital market expectations, with practical insights and real-world case studies.
  • The Phillips Curve and Price Stability
    A comprehensive exploration of the Phillips Curve's short-run and long-run dynamics, the role of inflation expectations, and the significance of price stability in economic policy.
  • Stagflation and Supply Shocks
    Explore the dynamics of stagflation and supply-side disruptions, their macroeconomic implications, and policy dilemmas faced by governments and central banks.
  • Hyperinflation and Historical Perspectives
    Explore the causes, consequences, and prominent historical examples of hyperinflation, and learn practical strategies for preparing portfolios and national economies against severe currency debasement.
  • Core vs. Headline Inflation Measures
    Discover the differences between core and headline inflation metrics, how each informs central bank policy, and their relevance for portfolio positioning in fluctuating markets.
• Chapter 5: International Trade and Capital Flows
  • Comparative Advantage and Gains from Trade
    Explore how comparative advantage, rooted in opportunity cost, drives specialization, international trade, and mutual economic gains—even if one nation has an absolute advantage in all goods.
  • Tariffs, Quotas, and Other Trade Barriers
    Explore the mechanics, impacts, and strategic considerations of imposing tariffs, quotas, and other trade barriers in a global marketplace, with emphasis on efficiency, resource allocation, and implications for portfolio management.
  • Trading Blocs and Regional Integration
    Discover how trading blocs reduce barriers, foster deeper regional cooperation, and shape global economic policies, while delving into key forms of integration and real-world examples.
  • Current Account, Capital Account, and Balance of Payments Composition
    Explore the structure of the balance of payments, focusing on the current and capital accounts and their impact on global financial flows and portfolio management decisions.
  • Marshall-Lerner Condition and J-Curve
    Explores how currency depreciation affects trade balances under the Marshall-Lerner condition and illustrates why trade balances may initially worsen before improving in the J-Curve phenomenon.
  • Levels of Economic Integration
    Explore the sequential stages of economic integration—from preferential trading areas to monetary unions—understanding their economic impact and implications for capital markets.
  • Terms of Trade
    Explore how a nation’s Terms of Trade ratio influences competitiveness, living standards, and global trade dynamics. Understand key drivers like commodity price shifts, currency fluctuations, and domestic productivity changes.
  • Trade in Services and Global Value Chains
    Explore how intangible services and complex global production networks shape modern international trade, highlighting the challenges, policy dimensions, and financial implications in cross-border transactions.
• Chapter 6: Currency Exchange Rates
  • Nominal versus Real Exchange Rates
    Explore the difference between nominal and real exchange rates, their role in international finance, and how adjustments for price levels affect currency competitiveness.
  • Exchange Rate Determination and Regimes
    Understand how exchange rates are determined by supply and demand factors, as well as how various floating, fixed, and managed regimes shape currency markets and influence global investment decisions.
  • Purchasing Power Parity and Interest Rate Parity
    Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) are key exchange rate theories for global portfolio managers. Learn how inflation and interest rates shape currency valuations and how these concepts facilitate hedging and risk management in international markets.
  • Spot and Forward Exchange Rates
    Gain a deep understanding of spot and forward currency exchange rates, including their role in hedging, speculation, and investment, as well as practical formulas and real-world applications.
  • Triangular Arbitrage and Cross Rates
    Explore the fundamentals of triangular arbitrage and cross rates, understand how currency mispricings can lead to riskless profits, and learn best practices to detect and execute these strategies quickly under real-world market conditions.
  • Currency Hedging, Speculation, and Carry Trades
    Gain a capstone-level understanding of currency hedging techniques, speculation strategies, and the mechanics of carry trades, along with critical risk management considerations for CFA Level I candidates.
  • Effective Exchange Rate Indices
    Learn how to measure a currency’s external value through nominal and real trade-weighted indices, interpret their moves, and apply them in portfolio decisions.
  • The Impossible Trinity (Monetary Policy, Exchange Rates, Capital Flows)
    Explore the core trade-offs that shape global currency policies, where countries must choose two out of three objectives: free capital flows, fixed exchange rates, and independent monetary policy.
  • Exchange Rate Pass-Through to Domestic Prices
    A comprehensive exploration of how exchange rate movements impact domestic prices, focusing on the mechanics of exchange rate pass-through, its measurement, and implications for inflation, corporate pricing, and investment strategy.
• Chapter 7: Monetary System, Monetary and Fiscal Policy
  • Money, Central Banks, and the Money Supply
    A deep dive into the nature of money, its evolution, the workings of central banks, and how money is created and managed in modern economies.
  • Demand for Money and the Equation of Exchange
    Explore why households and firms hold money, learn about Keynesian vs. Monetarist views on money demand, and master the classic Equation of Exchange (MV=PQ).
  • Inflation Targeting and Other Monetary Policy Regimes
    Explore key monetary policy frameworks including inflation targeting, exchange rate targeting, monetary targeting, and nominal GDP targeting, examining their goals, benefits, and challenges.
  • Automatic Stabilizers and the Role of Government Debt
    Explore how automatic stabilizers function, how they differ from discretionary fiscal policy, and the dynamic role of government debt in macroeconomic stabilization.
  • Implementation Lags in Monetary and Fiscal Policy
    Dive into the critical concept of policy lags—recognition, decision, implementation, and effectiveness—and examine the nuanced timing challenges that confront monetary and fiscal authorities, along with key portfolio management considerations for CFA candidates.
  • Monetary Policy Tools and Transmission Mechanisms
    Discover how central banks use open market operations, policy rates, reserve requirements, and forward guidance to shape financial conditions, influence aggregate demand, and manage inflation.
  • Fiscal Policy Tools (Government Spending, Taxation, Budgets)
    Explore government spending categories, taxation policies, budget formation, and their macroeconomic impacts. Understand deficits, surpluses, the multiplier effect, and how fiscal policy influences both economies and capital markets.
  • Fiscal Multipliers
    Explore the fundamentals and advanced nuances of fiscal multipliers, including spending and tax multipliers, the role of marginal propensity to consume, policy credibility, and their impact on national income.
  • Interactions between Monetary and Fiscal Policy
    Explore coordinated monetary and fiscal policy, policy conflicts, the policy trilemma, and how independence of central banks shapes price stability and economic growth.
  • Monetary Policy Strategy (Exchange Rate vs. Inflation Targeting)
    A deep exploration of exchange rate targeting and inflation targeting, analyzing the benefits, drawbacks, and practical considerations of differing monetary policy regimes.
  • Central Bank Independence and Credibility
    Explore how central banks maintain independence and credibility, why it matters for inflation control, and how governance structures enhance public trust.
  • Unconventional Monetary Policies (Quantitative Easing)
    A comprehensive exploration of how central banks employ unconventional monetary tools, such as quantitative easing and credit easing, to stabilize markets and influence long-term yields when policy rates approach zero.
  • Zero Lower Bound Constraints and Negative Interest Rates
    Explore how central banks handle the Zero Lower Bound (ZLB), implement Negative Interest Rate Policies (NIRP), and the potential effects on financial markets and stability. This section includes real-world examples, practical insights, and tips for CFA Level I exam readiness.
  • Supply‐Side Economics and the Laffer Curve
    Explore the core principles of supply-side economics, the intriguing shape of the Laffer Curve, and how tax rates can influence economic behavior, fiscal outcomes, and asset valuations.
• Chapter 8: Economic Growth and Development
  • Factors of Growth (Labor, Capital, Productivity)
    In-depth exploration of how labor, capital, and productivity interact and drive economic growth, featuring real-world examples, diagrams, and exam-focused insights.
  • Growth Theories (Classical, Neoclassical, Endogenous)
    Explore the foundational frameworks of Classical, Neoclassical, and Endogenous Growth Theories, and learn how each explains long-run economic expansion, productivity, and policy implications for sustainable development.
  • Human Capital, Technology, and Innovation
    Explore how education, skill development, and cutting-edge technology drive economic growth, and learn about the policies and entrepreneurial ecosystems that foster innovative capacity worldwide.
  • Demographics and Growth
    Explore how changing population structures—birth rates, life expectancy, migration, and urbanization—shape labor dynamics, savings, and economic development in this comprehensive guide to demographics and growth.
  • Barriers to Economic Development
    A deep dive into key obstacles like poor governance, corruption, inadequate capital, and social inequities that hinder sustainable growth—complete with real-world examples, practical insights, and exam-focused applications.
  • Environmental and Sustainability Considerations
    Advanced exploration of how economic growth interacts with environmental challenges, sustainable development, carbon pricing, and ESG integration for CFA Level III candidates.
  • Institutional Factors in Economic Development
    Explore how legal frameworks, governance, and political stability influence economic growth, reduce uncertainty, and encourage investment in emerging markets and advanced economies alike.
  • Role of Infrastructure in Economic Development
    Explore how infrastructure—from roads to digital networks—drives economic growth and social inclusion, alongside key financing strategies and maintenance considerations.
  • Absolute vs. Conditional Convergence Debate
    An in-depth exploration of whether all economies can catch up unconditionally or only under specific policy and structural conditions, including theoretical underpinnings, real-world evidence, and implications for investment decisions.
  • Measuring and Comparing Living Standards (HDI, Alternative Welfare Indicators)
    Explore how living standards are measured beyond GDP, focusing on HDI and alternative welfare indicators such as MPI, Gini Coefficient, and Gross National Happiness.
• Chapter 9: Effects of Regulations
  • Regulatory Frameworks and Governance
    Explore the fundamentals of regulatory frameworks, governance structures, and enforcement mechanisms shaping industries worldwide. Learn about principles-based vs. rules-based regulation, corporate governance codes, and the global impact of transparent oversight.
  • Competition Policy and Antitrust
    Comprehensive exploration of competition policy, antitrust laws, and the regulatory frameworks that maintain fair market competition across industries.
  • Consumer Protection and Externalities
    Explore key consumer protection regulations, externalities, and their significance in maintaining efficient, fair, and transparent markets.
  • Costs versus Benefits of Regulation
    Explore the trade-offs, methods, and real-world applications of evaluating regulatory policies through cost-benefit analysis, balancing direct and indirect costs with potential benefits like market stability and consumer protection.
  • Regulatory Capture and Challenges
    Explore the concept of regulatory capture, its manifestations, and strategies to preserve the public interest, drawing on real-world finance and economics perspectives.
  • International Regulatory Harmonization
    A practical yet in-depth look at aligning financial regulations across borders, focusing on drivers, challenges, benefits, and real-world applications for CFA candidates.
  • Mitigating Systemic Risk through Regulation
    Explore systemic risk and how macroprudential regulation, stress testing, and SIFI oversight can help prevent widespread financial instability.
  • Shadow Banking and Non-Bank Financial Regulations
    Explore the structure and risks of the shadow banking sector, its impact on financial stability, and key regulatory measures aimed at non-bank financial institutions.
  • Financial Innovation and Regulatory Challenges
    Explore how emerging financial technologies and processes outpace traditional oversight, creating both opportunities and risks for markets, regulators, and investors.
  • Political Economy and Public Choice Theory
    Explore how self-interested behavior, political structures, and economic incentives shape policy decisions, influencing regulatory outcomes and investor strategies.
• Chapter 1: Economic Analysis and Setting Capital Market Expectations
  • Approaches to Macroeconomic Forecasting
    Discover key methods and practical insights for predicting economic conditions, from econometric models to expert judgment, and learn how these forecasts inform portfolio strategies and capital market expectations.
  • Top-Down versus Bottom-Up Analysis
    Explore how both top-down and bottom-up approaches guide investment decision-making, from macro-driven forecasts to granular company-level evaluations.
  • Leading Economic Indicators and Data Sources
    Explore key leading economic indicators, their construction, data sources, and how to integrate them into forecasting and investment strategies.
  • Scenario Analysis and Sensitivity Analysis in Economic Forecasting
    Explore essential forecasting techniques that help analysts evaluate outcomes under varied economic conditions, including worst-case and best-case scenarios and the impact of changing key variables.
  • Integrating Economic Analysis with Investment Strategy
    Learn how to align macroeconomic forecasts with investment decisions, covering strategic and tactical asset allocation, sector rotation, security selection, risk management, and more.
  • Cyclical Analysis for Asset Return Forecasting
    Explore how different phases of the economic cycle influence asset returns, discover indicators for turning points, and learn how to adapt investment strategies to align with cyclical shifts.
  • Using Big Data and Machine Learning in Economic Forecasting
    Explore the use of big data and machine learning techniques in economic forecasting, including applications like nowcasting, sentiment analysis, and pattern recognition, while addressing practical challenges, ethical considerations, and model integration strategies.
  • Model Uncertainty and Forecast Accuracy
    Discover how forecasting models can go awry due to incorrect assumptions or structural breaks, and learn practical ways to improve forecast accuracy and manage uncertainty.
• Chapter 11: Effects of Geopolitics on Economies and Investment Markets
  • Geopolitics and Globalization
    Explore how the interplay of political power dynamics and global interconnectedness shapes economies, financial markets, and investment strategies, focusing on risks, opportunities, and historical evolutions of globalization.
  • Trade Disputes, Sanctions, and Tariff Wars
    In-depth exploration of how trade disputes, tariff wars, and sanctions reshape global markets and influence investment decisions
  • Political Risk and Regulatory Uncertainty
    Explore how geopolitical shifts, political leadership changes, and evolving regulations impact global investment decisions. Understand key types of political risk, strategies to mitigate uncertain regulatory environments, and discover practical examples relevant for CFA candidates.
  • Assessing Geopolitical Risk and Economic Vulnerabilities
    Learn structured frameworks, scenario analysis, and investment positioning strategies for evaluating how geopolitical forces can impact economies, markets, and investor portfolios.
  • Role of International Organizations (IMF, World Bank, WTO)
    An in-depth look at the major international financial organizations shaping global economic stability, trade, and development—exploring their mandates, influence on geopolitics, and investor considerations.
  • Tools of Geopolitics and Diplomacy
    Explore how nations strategically use diplomacy, economic statecraft, and alliances to shape policies, markets, and global governance—offering investors insights into geopolitical risk and opportunity.
  • Energy Security and Commodity Geopolitics
    Explore how energy resources, resource nationalism, and shifting global power dynamics impact economies and investment markets.
  • Digital Currencies and the Global Financial System
    Explore the transformative role of digital currencies, their geopolitical significance, and how they impact global capital markets, monetary sovereignty, and portfolio decisions.
• Chapter 12: Applications of Economic Factors in the Investment Process
  • Linking Macroeconomic Data to Asset Valuation
    Discover how macroeconomic indicators like GDP growth and inflation influence asset prices, shape corporate revenues, and guide valuation models through top-down and bottom-up analyses.
  • Sector Rotation and Cyclical Indicators
    Dive deep into sector rotation strategies and understand how cyclical indicators guide portfolio decisions across different phases of the business cycle.
  • Monetary/Fiscal Policy Turning Points and Portfolio Decisions
    Explore how shifts in monetary and fiscal policies affect portfolio decision-making, including bond positioning, yield curves, currency impacts, and practical strategies for detecting turning points.
  • Using Macroeconomic Indicators for Tactical Asset Allocation
    Learn how to leverage real-time economic data to dynamically adjust portfolio weights and enhance investment returns.
  • Diversification and Economic Cycles
    Explore how economic cycles influence asset correlations and portfolio diversification, leveraging multi-asset and global strategies to manage risk and enhance returns.
  • Scenario Analysis and Managing Economic Risks
    Explore practical methods of constructing scenarios, identifying key macroeconomic drivers, and mitigating portfolio threats utilizing scenario analysis in investment decision-making.
  • Macroeconomic Surprises and Asset Performance
    Explore how unexpected shifts in economic indicators can influence equity, bond, and currency markets, and discover how to integrate surprise analysis into portfolio decisions.
  • Business Sentiment Surveys and Market Expectations
    A comprehensive exploration of how business sentiment indicators interplay with market expectations, guiding investment decisions and macroeconomic analyses.
  • Nowcasting and Real-Time Indicators
    Discover how nowcasting and real-time economic indicators provide immediate insight into current market conditions, aiding portfolio decisions in fast-moving environments.