CFA level 1 study note book2 2014

2014 I Levell SchweserNotes'" for the CFA· Exam Economics Book rz-: I{ A P LAN \!.) SCHOOL OF PROFESSIONAL AND CONTINUING EDUCATION BOOK 2- ECONOMICS Reading A ignmenu and Learning Outcome Statemenu Study Session - Economics: Microcconomic Analysis Study Session - Economics: Macroeconomic: Analysis 124 Study Session - Economics: Economics in a Global Context 208 Sdf-Test: Economic:s 250 Formulas .• .• • • 254 Index 258 SCHWESERNOTESTM 2014 CFA LEVEL I BOOK 2: ECONOMICS C2013 Kaplan, Inc All rights reserved Published in 2013 by Kaplan, Inc Printed in the United States of America ISBN: 978-1-42n-4906-2/1-42n-4906-X PPN: 3200-4007 1£this book does not haw the holosram ,.ith ,he Kaplan Sch "CScrlogo on the back cowr it was discribu.ccd without permission oCKaplan Schwner a Division o~ Kaplan Inc., and is in direce violation oE ,ION) copyright 11 " Your usisuncc in pursuing potentia.! "iolacors of this law " I~atly appl'C'Ciucd Required CFA Inltitute clisdaimcr "CEAfJ and Ckartcnd financial AnaJysttl) arc tnckmuks OWDcd by CFA Institute CfA Institute (formerty the A'iociation for Jnvt.unntt MIDIP:IDCDt and Re.e-arch) don Dot endorse promote en-Icw, or l''UTUlt the accuracy of the producu or KrvKn ofl'cn:d by Kaplaa SCJ:r.m::Kf.material contained within thi text arc the copyripccd property 0( CFA Institute Tbe foU u.S is the copplsl" dlsclo.Iln: for thel< riaI.: ·CopyriPt, 201', CfA I••titute R.produccd ad ftPublishedfrom 201 Lutnins Outcome Statemeau, Levd I,ll, and III que"ion fro CFA" Procnm !t.f.t~ria.l.~ CFA lrubtutc Standards of Professional Conduct md CFA Institute's Clobal Invrstmcat i'erformaftce Standard with permi.sion (rom CFA J.n.itute All Ri,lu • ~.Uftd.· Ccnain material mar not K copied without wriucn permission from the author The unauthorized d"plication ot the-Ienotel is a YioJatioa of ,Iabal copyrilht laws and the CFA lrutitutc Code of Ec.h.ia Your a••i.lance in punuin, potC'ntial violaton ot tLis law i pady appreciated 11:r.CIC' DiKlaimcr: The 5chwc," Notet bouJel be used ill conjunctioD with tbe oripn.aJ Radinp s JC't fOnA by CFA Institute in their 20)4 CFA I nTII StudT Cuide The information contained in these "ota cover topiC'l cootainN in tAC readings refereeced by CfA lnstitute and i bclin'Cd to be accurate However their accuracy a.nnot be guataDtC'Cd nor i, any W2.rranty coa~ as to your ultimate aam lu(cas The a,,&hor o( tbc rc(crnaccd tcaeliap have DOtendorsed Of ~~~lOftd these Notes 02013 KapIan,lne READING ASSIGNMENTS AND LEARNING OUTCOME STATEMENTS TN fDilDw;nl mat";"/ is a Tt";~Wof tN Economic« p,;ncipkJ In;l''~dto add,ro tN I~"rn;nl Or4(.m~ Jtattmtnts Itt flnh by CF-A Instina«: I , STUDY SESSION Reading ~signmenu uonom;t:f CFA Program Level I 2014 Curriculum Volume (CFA Institute, 2013) 13 Demand and Supply An:a.lysis:Introduction 14 Demand and Supply An:a.lysis:Consumer Demand 15 Demand and Supply An:a.lysis:The Firm 16 The Firm and Market Structures STUDY SESSION page page 46 page 58 page 92 Reading Assignments UDnDm;t:f CFA Program Level I 2014 Curriculum Volume (CFA Instirute, 2013) 17 Aggregate Output Prices and Economic Growth 18 Undersranding Bwincss Cydcs 19 Monetary and Fiscal Policy page 124 page 155 page 177 , STUDY SESSION Reading ~signmenu uonom;t:f CFA Program Level I 2014 Curriculum Volume (CFA Institute, 2013) 20 Internation:a.l Trade and Capit:a.l Flows page 208 21 Currency Exchange Rates page 229 02013 Kaplan Inc Book - Ealnomia IUading Auignmenu and UamiAg OutcOme StatementS LEARNING OUTCOME STATEMENTS (LOS) STIJDY SESSION The topical : 165 law of «mand 10 law of supply 10 leading indicators 169 l""eraged accounts 232 liquidity uap 190 living 26 LM CUM: 132 long run 70 long-run at;gregaft supply 138 long-run shutdown point 72 nanow moncy 178 Nash equilibrium 104 national income 128 nawn! monopoly 93 II natusa! rate of unemploymrnt 167 natural nosourcos 144 Neoclassical school 159 ner rxporu 127.208 New Classical school 160 New Keynesian school 159 N-6sm concentration ratio 113 nominal rxchange rate 229 nominal GOP 125 non-accderating inRation rat of unemployment 167 noncompetitive bid 18 normal good 34, 53 normal profit 60 M macroeconomic equilibrium 139 managed Boating oxchange "lies 238 managrmrnt of rxellangr rues within crawling bands 238 marginal cost pricing III marginal co 67 marginal product 65 marginal product of labor 81 marginal rate of substitution 49 marginal revenue 62 marginal revenue product 83 markup 100 MushaU-Lrrner condition 239 mearu of payment 178 mtclium of exchangr 178 menu CO$U 183 merchandise and services tradr 219 minimum domestic cement "'quirtmrnt 215 minimum efficient seale 76 minimum "'age 26 MonmsislScbooi 159 monttary policy monttary policy tools 185 monttary policy uansmission mechanism 187 monetary union 237 money In money multiplier 179 money nwuality 180 money ".s 141 monopolistic competition 92 99 monopoly 92 multinational corporation 209 n Pagc260 o objective of a centsa! bank 183 obstacles to efficient allocation 23 oligopoly 92 operational independrnoe 186 opportunity Stt 47 output gop 140 p Puscht index 165 partial equilibrium 15 pasticipation ratio 161 peak 155 pegging 183 per-capita ,a) GOP 127 pesfect competition 92 personal disposable income 128 personal income 128 physical capital stock 1~4 potential GOP 135 price ceiling 2~ price controls 23 price discrimination 108 price elasticity 31 price 800r 25 price index 162 prisoner's dilemma 104 privale valur auction 17 producer price index 165 producer surplus 20 product innovation 101 production function 65 145 production quotas 30 02013 Kaplan Inc, Ilook - &anomies Index productivity 161 promiuory no 178 public ,oods 24 subsidies 23.30 138 subuiw.es 34 subs.i.ution dfec 50 sum-of-valee-edded method 125 supply of money 180 su.stainable rate of «XInomic gr",,~h 145 Q quantita.ive easing 190 quantity