CFA® Economics

Summary, Syllabus, Topics, and Sample Questions (L1, L2, L3)

The CFA Economics topic focuses on economic theories and frameworks which provide a foundation for the various analyses found throughout the CFA curricula. Topics such as Equity Valuation or Fixed Income will apply the theories explored in Economics to their respective methods of analysis.

About 80-90% of the information covered by the CFA Economics curriculum is covered in typical macro and/or micro college-level introductory Economics courses. The novel 10-20% of the material will dive deeper into specific topics such as schools of economic thought, price indexes, business cycles, currency markets, exchange rates, etc. and also introduce new topics, such as foreign currency exchange.

Economics maintains a similar topic weighting through each level of the CFA exam cycle. Building a strong foundation in micro-and macro-economic principles will pay dividends as candidates advance through the CFA and encounter more complex financial concepts.

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Whether you have a finance or economics background, Economics is a central topic on all three levels of the CFA examinations that demands some attention to learn, notably the exchange rate segment!

Building a good foundation in CFA Level 1 Economics is critical to improving your prospects of passing CFA Levels 2 and 3, as it pervades all other topics.

  • Be flexible with your expectations: there are a lot of things that need to be clarified and discussed. Once you’ve grasped the concepts, you’ll notice several recurring motifs in various situations.
  • Aim to Understand the Logic: This is not a topic for memorizing.
  • Study the Graphs: While graphs aren’t usually on the exam, their reasoning is. Consider the graphs as a visual representation of a real-world situation.
  • Practice Applying Concepts in Different Situations with Practice Questions: This is a crucial stage in the learning process that must be completed at the end of each study session.

We now know that one of the most effective ways to prepare for the CFA tests is to practice. Always review the MCQs at the end of each chapter of the CFAI. UWorld’s all-digital learning platform is designed to assist students in passing the CFA exams by offering practice problems with detailed rationales for all answer alternatives, step-by-step problem-solving instructions, and realistic, professionally-produced graphics. Learn more about UWorld’s QBank.

It is critical to understand the steps involved in creating a formula, as this will aid in memorizing the formulas. When we understand the full explanation or method behind a math formula, it becomes much easier to remember since it makes more sense. UWorld’s SimpleSheets provide you with the formulas you need to pass the exam in a simple, intuitive layout right at your fingertips. Formulas are also pre-filled in our ReadyDeck flashcards that come included with all of our products. Check out our CFA L1 Formula sheet to download.

Economics is a central topic on all three levels of the CFA examinations that requires some effort to study, particularly the exchange rate segment, whether you have a finance or economics background.

Because it penetrates all other areas, a strong foundation in CFA Level 1-2 Economics is crucial to enhancing your chances of passing CFA Level 3.

  • Expect a lot of topics to be explained and discussed, so be flexible with your expectations. You’ll notice several recurring motifs in various scenarios once you’ve comprehended the fundamentals.
  • Attempt to comprehend the logic: this is not a topic to try and just memorize.
  • Examine the Graphs: While graphs themselves aren’t frequently on the exam, the reasoning behind them is. Consider the graphs to be a graphic depiction of a real-life situation.
  • Applying Concepts in a Variety of Situations with Practice Questions: This is an important step in the learning process that must be performed at the end of each study session.
While the first two levels revolved around basic financial knowledge, investment valuation comprehension, and the application of both, the CFA Level III exam focuses on portfolio management and wealth planning. The CFA Level 3 difficulty is comparable to a Master’s degree by most comparisons. The Economics portion of Level 3 is part of the Portfolio Management section, and builds on the content from L1 and L2.

The discrepancy between estimated GDP based on trends and actual GDP is known as the output gap. Inflation tends to rise as the gap decreases. The economy is under inflationary pressure if real GDP exceeds estimated GDP.

  • A positive output gap means growth is above the trend rate and is inflationary.
  • A negative output gap means an economic downturn with unemployment and spare capacity.
  • The output gap = Y- Yf

Other CFA Exam Topics

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