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| Foreword | |
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| Acknowledgments | |
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| About the CFA Institute Investment Series | |
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| Demand and Supply Analysis: Introduction | |
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| Learning Outcomes | |
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| Introduction | |
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| Types of Markets | |
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| Basic Principles and Concepts | |
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| The Demand Function and the Demand Curve | |
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| Changes in Demand vs. Movements along the Demand Curve | |
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| The Supply Function and the Supply Curve | |
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| Changes in Supply vs. Movements along the Supply Curve | |
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| Aggregating the Demand and Supply Functions | |
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| Market Equilibrium | |
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| The Market Mechanism: Iterating toward Equilibrium-or Not | |
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| Auctions as a Way to Find Equilibrium Price | |
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| Consumer Surplus-Value minus Expenditure | |
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| Producer Surplus-Revenue minus Variable Cost | |
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| Total Surplus-Total Value minus Total Variable Cost | |
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| Markets Maximize Society's Total Surplus | |
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| Market Interference: The Negative Impact on Total Surplus | |
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| Demand Elasticities | |
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| Own-Price Elasticity of Demand | |
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| Own-Price Elasticity of Demand: Impact on Total Expenditure | |
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| Income Elasticity of Demand: Normal and Inferior Goods | |
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| Cross-price Elasticity of Demand: Substitutes and Complements | |
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| Calculating Demand Elasticities from Demand Functions | |
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| Summary | |
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| Practice Problems | |
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| Demand and Supply Analysis: Consumer Demand | |
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| Learning Outcomes | |
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| Introduction | |
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| Consumer Theory: From Preferences to Demand Functions | |
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| Utility Theory: Modeling Preferences and Tastes | |
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| Axioms of the Theory of Consumer Choice | |
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| Representing the Preference of a Consumer: The Utility Function | |
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| Indifference Curves: The Graphical Portrayal of the Utility Function | |
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| Indifference Curve Maps | |
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| Gains from Voluntary Exchange: Creating Wealth through Trade | |
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| The Opportunity Set: Consumption, Production, and Investment Choice | |
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| The Budget Constraint | |
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| The Production Opportunity Set | |
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| The Investment Opportunity Set | |
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| Consumer Equilibrium: Maximizing Utility Subject to the Budget Constraint | |
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| Determining the Consumer's Equilibrium Bundle of Goods | |
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| Consumer Response to Changes in Income: Normal and Inferior Goods | |
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| How the Consumer Responds to Changes in Price | |
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| Revisiting the Consumer's Demand Function | |
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| Consumer's Demand Curve from Preferences and Budget Constraints | |
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| Substitution and Income Effects for a Normal Good | |
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| Income and Substitution Effects for an Inferior Good | |
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| Negative Income Effect Larger than Substitution Effect: Giffen Goods | |
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| Veblen Goods: Another Possibility for a Positively Sloped Demand Curve | |
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| Summary | |
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| Practice Problems | |
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| Demand and Supply Analysis: The Firm | |
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| Learning Outcomes | |
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| Introduction | |
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| Objectives of the Firm | |
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| Types of Profit Measures | |
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| Comparison of Profit Measures | |
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| Analysis of Revenue, Costs, and Profits | |
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| Profit Maximization | |
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| Productivity | |
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| Summary | |
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| Practice Problems | |
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| The Firm and Market Structures | |
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| Learning Outcomes | |
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| Introduction | |
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| Analysis of Market Structures | |
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| Economists' Four Types of Structure | |
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| Factors That Determine Market Structure | |
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| Perfect Competition | |
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| Demand Analysis in Perfectly Competitive Markets | |
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| Supply Analysis in Perfectly Competitive Markets | |
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| Optimal Price and Output in Perfectly Competitive Markets | |
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| Factors Affecting Long-Run Equilibrium in Perfectly Competitive Markets | |
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| Monopolistic Competition | |
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| Demand Analysis in Monopolistically Competitive Markets | |
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| Supply Analysis in Monopolistically Competitive Markets | |
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| Optimal Price and Output in Monopolistically Competitive Markets | |
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| Factors Affecting Long-Run Equilibrium in Monopolistically Competitive Markets | |
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| Oligopoly | |
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| Demand Analysis and Pricing Strategies in Oligopoly Markets | |
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| Supply Analysis in Oligopoly Markets | |
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| Optimal Price and Output in Oligopoly Markets | |
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| Factors Affecting Long-Run Equilibrium in Oligopoly Markets | |
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| Monopoly | |
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| Demand Analysis in Monopoly Markets | |
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| Supply Analysis in Monopoly Markets | |
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| Optimal Price and Output in Monopoly Markets | |
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| Price Discrimination and Consumer Surplus | |
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| Factors Affecting Long-Run Equilibrium in Monopoly Markets | |
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| Identification of Market Structure | |
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| Econometric Approaches | |
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| Simpler Measures | |
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| Summary | |
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| Practice Problems | |
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| Aggregate Output, Prices, and Economic Growth | |
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| Learning Outcomes | |
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| Introduction | |
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| Aggregate Output and Income | |
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| Gross Domestic Product | |
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| The Components of GDP | |
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| GDP, National Income, Personal Income, and Personal Disposable Income | |
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| Aggregate Demand, Aggregate Supply, and Equilibrium | |
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| Aggregate Demand | |
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| Aggregate Supply | |
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| Shifts in Aggregate Demand and Supply | |
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| Equilibrium GDP and Prices | |
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| Economic Growth and Sustainability | |
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| The Production Function and Potential GDP | |
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| Sources of Economic Growth | |
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| Measures of Sustainable Growth | |
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| Summary | |
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| Practice Problems | |
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| Understanding Business Cycles | |
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| Learning Outcomes | |
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| Introduction | |
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| Overview of the Business Cycle | |
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| Phases of the Business Cycle | |
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| Resource Use through the Business Cycle | |
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| Housing Sector Behavior | |
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| External Trade Sector Behavior | |
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| Theories of the Business Cycle | |
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| Neoclassical and Austrian Schools | |
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| Keynesian and Monetarist Schools | |
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| The New Classical School | |
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| Unemployment and Inflation | |
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| Unemployment | |
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| Inflation | |
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| Economic Indicators | |
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| Popular Economic Indicators | |
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| Other Variables Used as Economic Indicators | |
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| Summary | |
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| Practice Problems | |
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| Monetary and Fiscal Policy | |
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| Learning Outcomes | |
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| Introduction | |
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| Monetary Policy | |
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| Money | |
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| The Roles of Central Banks | |
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| The Objectives of Monetary Policy | |
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| Contractionary and Expansionary Monetary Policies and the Neutral Rate | |
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| Limitations of Monetary Policy | |
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| Fiscal Policy | |
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| Roles and Objectives of Fiscal Policy | |
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| Fiscal Policy Tools and the Macroeconomy | |
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| Fiscal Policy Implementation: Active and Discretionary Fiscal Policy | |
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| The Relationship Between Monetary and Fiscal Policy | |
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| Factors Influencing the Mix of Fiscal and Monetary Policy | |
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| Quantitative Easing and Policy Interaction | |
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| The Importance of Credibility and Commitment | |
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| Summary | |
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| Practice Problems | |
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| International Trade and Capital Flows | |
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| Learning Outcomes | |
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| Introduction | |
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| International Trade | |
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| Basic Terminology | |
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| Patterns and Trends in International Trade and Capital Flows | |
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| Benefits and Costs of International Trade | |
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| Comparative Advantage and the Gains from Trade | |
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| Trade and Capital Flows: Restrictions and Agreements | |
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| Tariffs | |
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| Quotas | |
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| Export Subsidies | |
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| Trading Blocs, Common Markets, and Economic Unions | |
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| Capital Restrictions | |
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| The Balance of Payments | |
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| Balance of Payments Accounts | |
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| Balance of Payment Components | |
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| Paired Transactions in the BOP Bookkeeping System | |
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| National Economic Accounts and the Balance of Payments | |
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| Trade Organizations | |
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| International Monetary Fund | |
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| World Bank Group | |
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| World Trade Organization | |
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| Summary | |
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| Practice Problems | |
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| Currency Exchange Rates | |
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| Learning Outcomes | |
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| Introduction | |
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| The Foreign Exchange Market | |
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| Market Functions | |
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| Market Participants | |
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| Market Size and Composition | |
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| Currency Exchange Rate Calculations | |
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| Exchange Rate Quotations | |
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| Cross-Rate Calculations | |
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| Forward Calculations | |
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| Exchange Rate Regimes | |
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| The Ideal Currency Regime | |
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| Historical Perspective on Currency Regimes | |
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| A Taxonomy of Currency Regimes | |
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| Exchange Rates, International Trade, and Capital Flows | |
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| Exchange Rates and the Trade Balance: The Elasticities Approach | |
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| Exchange Rates and the Trade Balance: The Absorption Approach | |
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| Summary | |
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| Practice Problems | |
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| Currency Exchange Rates: Determination and Forecasting | |
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| Learning Outcomes | |
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| Introduction | |
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| Foreign Exchange Market Concepts | |
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| Arbitrage Constraints on Spot Exchange Rate Quotes | |
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| Forward Markets | |
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| A Long-Term Framework For Exchange Rates | |
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| International Parity Conditions | |
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| Assessing an Exchange Rate's Equilibrium Level | |
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| Tying It Together: A Model That Includes Long-Term Equilibrium | |
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| The Carry Trade | |
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| The Impact of Balance of Payments Flows | |
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| Current Account Imbalances and the Determination of Exchange Rates | |
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| Capital Flows and the Determination of Exchange Rates | |
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| Monetary And Fiscal Policies | |
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| The Mundell-Fleming Model | |
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| Monetary Models of Exchange Rate Determination | |
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| The Taylor Rule and the Determination of Exchange Rates | |
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| Monetary Policy and Exchange Rates-The Historical Evidence | |
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| Fiscal Policy and the Determination of Exchange Rates | |
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| Exchange Rate Management: Intervention And Controls | |
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| Currency Crises | |
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| Shorter-Term Forecasting Tools | |
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| Technical Analysis | |
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| Order Flow, Sentiment, and Positioning | |
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| Summary | |
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| Appendix: Currency Codes Used in This Reading | |
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| Practice Problems | |
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| Economic Growth and the Investment Decision | |
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| Learning Outcomes | |
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| Introduction | |
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| Growth in the Global Economy: Developed vs. Developing Countries | |
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| Savings and Investment | |
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| Financial Markets and Intermediaries | |
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| Political Stability, Rule of Law, and Property Rights | |
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| Education and Health Care Systems | |
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| Tax and Regulatory Systems | |
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| Free Trade and Unrestricted Capital Flows | |
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| Summary of Factors Limiting Growth in Developing Countries | |
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| Why Potential Growth Matters To Investors | |
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| Determinants of Economic Growth | |
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| Production Function | |
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| Capital Deepening vs. Technological Progress | |
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| Growth Accounting | |
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| Extending the Production Function | |
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| Natural Resources | |
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| Labor Supply | |
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| Labor Quality: Human Capital | |
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| Capital: ICT and Non-ICT | |
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| Technology | |
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| Public Infrastructure | |
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| Summary | |
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| Theories of Growth | |
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| Classical Model | |
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| Neoclassical Model | |
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| Endogenous Growth Theory | |
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| Convergence Debate | |
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| Growth in an Open Economy | |
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| Summary | |
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| Practice Problems | |
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| Economics of Regulation | |
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| Learning Outcomes | |
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| Introduction | |
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| Overview of Regulation | |
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| Classification of Regulations and Regulators | |
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| Economic Rationale for Regulation | |
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| Regulatory Tools | |
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| Regulation of Commerce | |
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| Regulation of Financial Markets | |
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| Cost-Benefit Analysis of Regulation | |
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| Analysis of Regulation | |
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| Effects of Regulations | |
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| Summary | |
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| Practice Problems | |
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| Glossary | |
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| References | |
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| About the Editors | |
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| About the CFA Program | |
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| Index | |