feet How to Use the CFA Program Curriculum Curriculum Development Process Organization of the Curriculum. Features of the Curriculum Designing Your Personal Study Program Feedback Economics Study Session 4 Economics: Microeconomics and Macroeconomics Reading 14 ‘Topics in Demand and Supply Analysis Introduction Demand Analysis: The Consumer Demand Concepts ‘Own-Price Elasticity of Demand Income Elasticity of Demand ross-Price Elasticity of Demand Substitution and Income Effects Normal and Inferior Goods Supply Analysis: The Firm ‘Marginal Returns and Productivity Breakeven and Shutdown Analysis Understanding Economies and Diseconomies of Scale Summary Practice Problems Solutions Reading 15, ‘The Firm and Market Structures Introduction Analysis of Market Structures Economists’ Four Types of Structure Factors That Determine Market Structure Perfect Competition Demand Analysis in Perfectly Competitive Markets ‘Supply Analysis in Perfectly Competitive Markets ‘Optimal Price and Output in Perfectly Competitive Markets Factors Affecting Long-Run Equilibrium in Perfectly Competitive Markets Monopolistic Competition Demand Analysis in Monopolistically Competitive Markets ‘Supply Analysis in Monopolistically Competitive Markets Optimal Price and Output in Monopolistically Competitive Markets Factors Affecting Long-Run Equilibrium in Monopolistically Competitive Markets indicates an optional segment vi vi vil 59 59 60 60 62 65 2 3 7 79 80 a1 a1Reading 16 Reading 17 Oligopoly Demand Analysis and Pricing Strategies in Oligopoly Markets Supply Analysis in Oligopoly Markets Optimal Price and Output in Oligopoly Markets Factors Affecting Long-Run Equilibrium in Oligopoly Markets Monopoly Demand Analysis in Monopoly Markets Supply Analysis in Monopoly Markets Optimal Price and Output in Monopoly Markets Price Discrimination and Consumer Surplus Factors Affecting Long-Run Equilibrium in Monopoly Markets, Identification of Market Structure Econometric Approaches, Simpler Measures Summary Practice Problems Solutions Aggregate Output, Prices, and Economic Growth Introduction Aggregate Output and Income Gross Domestic Product ‘The Components of GDP GOP, National Income, Personal Income, and Personal Disposable Income Aggregate Demand, Aggregate Supply, and Equilibrium Aggregate Demand Aggregate Supply Shifts in Aggregate Demand and Supply Equilibrium GDP and Prices Economic Growth and Sustainability The Production Function and Potential GDP Sources of Economic Growth Measures of Sustainable Growth Summary Practice Problems Solutions Understanding Business Cycles Introduction Overview of the Business Cycle Phases of the Business Cycle Resource Use through the Business Cycle Housing Sector Behavior External Trade Sector Behavior Theories of the Business Cycle Neoclassical and Austrian Schools Keynesian and Monetarist Schools ‘The New Classical School indicates an optional segment Contents 83 34 90 1 92 93 94 95 7 98. 100 101 102 102 104 106 110 u3 14 15 116 123 127 132 133 144 146 158 169 170 172 175 181 186 191 195 195 196 196 200 206 207 209 209 210 213Contents Study Session 5 Reading 18 Reading 19 Unemployment and Inflation Unemployment Inflation Economic Indicators Popular Economic Indicators Other Variables Used as Economic Indicators Summary Practice Problems Solutions Economics: Monetary and Fiscal Policy, International Trade, and Currency Exchange Rates ‘Monetary and Fiscal Policy Introduction Monetary Policy Money The Roles of Central Banks ‘The Objectives of Monetary Policy Contractionary and Expansionary Monetary Policies and the Neutral Rate Limitations of Monetary Policy Fiscal Policy Roles and Objectives of Fiscal Policy Fiscal Policy Tools and the Macroeconomy Fiscal Policy Implementation: Active and Discretionary Fiscal Policy The Relationship between Monetary and Fiscal Policy Factots Influencing the Mix of Fiscal and Monetary Policy ‘Quantitative Easing and Policy Interaction The Importance of Credibility and Commitment Summary Practice Problems Solutions International Trade and Capital Flows Introduction International Trade Basic Terminology Patterns and Trends in International Trade and Capital Flows Benefits and Costs of International Trade Comparative Advantage and the Gains from Trade Trade and Capital Flows: Restrictions and Agreements Tariffs Quotas Export Subsidies Trading Blocs, Common Markets, and Economic Unions Capital Restrictions The Balance of Payments Balance of Payments Accounts indicates an optional segment 217 217 221 235 235 240 243 245 248, 251 253 254 256 256 269 272 288 289 294 294 302 308 312 313 314 315 316 319 324 327 327 328 328 331 335 339 348, 348, 351 351 354 358 361 362Reading 20 Balance of Payment Components Paired Transactions in the BOP Bookkeeping System National Economic Accounts and the Balance of Payments ‘Trade Organizations International Monetary Fund World Bank Group Wotld Trade Organization Summary Practice Problems Solutions Currency Exchange Rates Introduction ‘The Foreign Exchange Market Market Functions Market Participants Market Size and Composition Currency Exchange Rate Calculations Exchange Rate Quotations Cross-Rate Calculations Forward Calculations Exchange Rate Regimes The Ideal Currency Regime Historical Perspective on Currency Regimes A Taxonomy of Currency Regimes Exchange Rates, International Trade, and Capital Flows Exchange Rates and the Trade Balance: The Elasticities Approach Exchange Rates and the Trade Balance: The Absorption Approach Summary Practice Problems Solutions Glossary Index indicates an optional segment Contents 363 366 369 373 374 376 377 380 384 388