Hello People, This new Thread is about Discussions & Conceptual understanding of Economics for CFA Level 1.Since people attempting are from both Commerce & Non Commece Background, I would urge people from Commerce Background to help out other…
Hello People,
This new Thread is about Discussions & Conceptual understanding of Economics for CFA Level 1.Since people attempting are from both Commerce & Non Commece Background, I would urge people from Commerce Background to help out other people & spread the learning.
I would try to solve the Queries but would need help from other people as well. Everybody is invited to chip in with their views & understanding of the subject matter:cheerio:
The Study Sessions for Economics are as follows with the learning outcome for Each Session
http://www.cfainstitute.org/CFA%20Program%20Study%20Session/2011_l1_ss04.pdf
http://www.cfainstitute.org/CFA%20Program%20Study%20Session/2011_l1_ss04.pdf
http://www.cfainstitute.org/CFA%20Program%20Study%20Session/2011_l1_ss06.pdf
Here we can discuss Previous exam questions & any other questions that anybody has related to the concepts.
So guys Lets gear ourselves up for a cracking learning session
:
The CFA Level I Exam
The economics portion of the CFA Level I exam touches on a wide range of economic theory. The material covered would normally be taught in senior (or graduate level) microeconomic, macroeconomic, money and banking, and international trade courses.
Here is one link i found useful & concise
Introduction
The economics portion of the CFA Level I exam touches on a wide range of economic theory. The material covered would normally be taught in senior (or graduate level) microeconomic, macroeconomic, money and banking, and international trade courses.
Here is one link i found useful & concise
Introduction
gud 2 c this thread.
I want to ask is preparing from schweser notes for economics more than sufficient or should one look in CFA material also.
@niks
I am an engineer so my finance basics are far from sound. I was able to comprehend economics from the schweser material. Although, i find the CFA material very interesting and comprehensive i switch to schweser when i need to speed up.
I totally think you can cover economics well enough from the schweser stuff.
gud 2 c this thread.
I want to ask is preparing from schweser notes for economics more than sufficient or should one look in CFA material also.
The notes are more than enough provided you read them well.
Nice Thread... Here I go with my first Eco-based question...
I am not posting MCQs... So that a single concept is completely discussed by one question itself.
How can the quality of goods related to income of a person ??
Nice Thread... Here I go with my first Eco-based question...
I am not posting MCQs... So that a single concept is completely discussed by one question itself.
How can the quality of goods related to income of a person ??
Well Very good concept to start of with..." Income Elasticity of Demand"
The answer to this question on first instance seems to be very easy "Higher the income of a person, Higher the quality of goods consumed by a person".
But on closer examination we can find that its not always true as the answer will depend on the type of goods in question:
Inferior Goods: These are goods which will be subtituted by the consumer as soon as the income level of the consumer increases. Thus these goods have a Negative Income Elasticity. It can be represented by a downward sloping curve on.
Normal Goods: These are goods with Positive Income Elasticity. They can further be bifurcated into necessity & luxury good. If the elasticity is less than 1 then the goods are termed as necessities & if it is greater than 1 then it is termed as a luxury good.
This means if the % change in qty demanded of a particular good is more than the % change in the income then the good falls under the Luxury Category but if the change in qty is less than the change in income then the goods can be termed as necessities.
Giffen Goods: These are inferior Goods which do not have Negative Income Elasticity.This is mostly a theoritical concept. More abt it can be seen here (Giffen good - Wikipedia, the free encyclopedia)
Nice Thread... Here I go with my first Eco-based question...
I am not posting MCQs... So that a single concept is completely discussed by one question itself.
How can the quality of goods related to income of a person ??
adding to what harry has said ,
i would suggest u to say see this as day to day thing !
the decision you and me take are very much similiar to these funda !
Lets say u have 1000 rupees with you .. u will buy 1 jean say at around 600 rs .u save 400 :cheerio:
now what if you have 1200 ? u will definitely spend that for next jean .. so u would buy two jean and save nothing ..
In economic terms, this is normal goods.. more money u have , more u buy and they have positive income effect
Now on the other hand , if u win a jack pot of 1 crore, would u like to travel in bus ?
definitely u would buy car and travel ..
so bus travel will become inferior when income raises .. so these goods are termed inferior goods..for these goods , income elasticity is negative :thumbsup:
now again u have further classification in normal goods .. they are necessity goods and luxury goods ..
necessity --> bread , clothes , etc without which we cant live a day
luxury --> as the name suggests , high income ppl have their own ways to comfort themselves ..
To sum up , just treat these concepts in day to day terms.. u can understand more easily rather than jus learning 1 .
ps : ignore typos
This discussion would surely be of great help to people like me. So, i'm putting forward my query here...
How is that 'velocity of circulation is independent of rate of money growth'. This comes related to Quantity Theory of Money. I was struggling to understand this particular concept for many days. I kindly request you guys to clarify the same.
This discussion would surely be of great help to people like me. So, i'm putting forward my query here...
How is that 'velocity of circulation is independent of rate of money growth'. This comes related to Quantity Theory of Money. I was struggling to understand this particular concept for many days. I kindly request you guys to clarify the same.
Quantity Theory of Money
The quantity theory of money states that there is a direct relationship between the quantity of money in an economy and the level of prices of goods and services sold. According to QTM, if the amount of money in an economy doubles, price levels also double, causing inflation. The consumer therefore pays twice as much for the same amount of the good or service.
The theory can be expressed in the following equation
M.V = P.Q
Where
M= Money Supply
V= Velocity of circulation (no of times money changes hands)
P= Average Prive Level
Q= Volume of transactions of goods & services.
Essentially, the theory emphasizes that the value of money is determined by the amount of money available in an economy. An increase in money supply results in a decrease in the value of money because an increase in money supply causes a rise in inflation.
Hence the relation between M & P is what is clearly evident here
The above equation is based on "Equation of Exchange",i.e, if the total money supply of a country is Rs 100 & it changes hands (gets spent) 5 times then the Total Spending = Rs 500
QTM adds assumptions to the logic of the equation of exchange. In its most basic form, the theory assumes that V (velocity of circulation) and T (volume of transactions) are constant in the short term
The theory also assumes that the quantity of money, which is determined by outside forces, is the main influence of economic activity in a society. A change in money supply results in changes in price levels and/or a change in supply of goods and services. It is primarily these changes in money stock that cause a change in spending. And the velocity of circulation depends not on the amount of money available or on the current price level but on changes in price levels.
Finally, the number of transactions (T) is determined by labor, capital, natural resources (i.e. the factors of production), knowledge and organization. The theory assumes an economy in equilibrium and at full employment.
The Assumptions here have been criticized, especially the one which holds V as constant as the velocity of circulation depends on consumer and business spending impulses, which cannot be constant. & also real income, the flow of money to the factors of production, increased. Therefore, velocity could change in response to changes in money supply.
Source: Investopedia, Some minor changes made & a lil restructuring done to include only relevant parts.
Hope this clarifies your doubts...
P.S. : Havent been able to see this for long but will be regular on this thread now..
How is the institutes module for economics? Or is there any other book/online resource(apart from investopedia) for economics? I have a commerce background(B.Com + Inter CA) but find SchweserNotes a little brief at times. Would like to go through few topics in detail.
P.S. I have not registered yet so dont have the modules.
How is the institutes module for economics? Or is there any other book/online resource(apart from investopedia) for economics? I have a commerce background(B.Com + Inter CA) but find SchweserNotes a little brief at times. Would like to go through few topics in detail.
P.S. I have not registered yet so dont have the modules.
Schwesser notes are just that,i.e, Notes & are no substitute for detailed reading which is available in the institute's module but nevertheless these notes are in reasonable detail to make one understand stuff.
P.S. This thread is for Economics concepts Discussion lets keep it just for that.
hello, now i m also part of it