CFA® Level I Economics Guide

The CFA Economics curriculum approaches the subject from the same perspective as college economics courses dealing with the topic. That is, the perspective is primarily one of economic theory rather than applied economics. Economics theory provides a framework or underpinning for many other modes of analysis (e.g., equity or derivative valuation, corporate issuers). However, economics applied correctly to equity analysis, or bond valuation is covered in Equity Valuation or Fixed Income, not in the Economics portion of the CFA curriculum.

Candidates that have taken at least two semesters (one on macro and one on micro) of college-level economics courses have likely been exposed to 80-90% of the issues covered by the CFA curriculum. However, the curriculum does go into specific topics in a bit more depth. CFA macroeconomics dives deeper in a few areas (e.g., schools of economic thought, price indexes, business cycles) than the typical college macroeconomics course. The curriculum also goes into more depth on currency markets, exchange rates, and the mathematics of the spot/forward exchange rate relationship than is encountered in the chapters on international economics in typical macroeconomics courses.

Candidates that took two or more college-level econ courses should find the CFA curriculum content mostly a refresher on the subject. Most of the areas cited above in which the curriculum goes into a given topic in a bit more depth should be readily understandable for Candidates who did reasonably well with their previous course work in economics. For the most part, the curriculum just investigates some topics in a bit more detail or slightly more depth than coverage on the same issues in college courses.

The big exception to the CFA curriculum’s similarity to college-level econ course content is the coverage of foreign exchange markets noted above. Issues such as spot and forward exchange rate quoting conventions, forward premiums/discounts, and real exchange rates are often tricky issues for those not already familiar with FX markets. As is true of the curriculum generally, Candidates are responsible for, and therefore should review the entirety of the Currency Exchange Rate Reading. However, there are no more than a few questions on these topics, so Candidates need to carefully weigh the trade-off between time spent mastering these issues versus the opportunity costs related study time devoted to more heavily tested issues.

Candidates with little or no previous college-level exposure to economics may find the going a bit tougher. Though issues related to Learning Outcome Statements (LOSs) are fully explained, the amount of supporting detail or number of examples used to illustrate those issues in many cases will be less extensive compared to that found in a college course textbook. Candidates in this situation may need to look to supplementary sources to augment what is written in the curriculum.