CFA Level 1 Economics: Actionable tips to cracking the Test

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Cracking a CFA Level 1 exam may appear easy but even to this very day, this exam ranks as one of the toughest examinations in the world. Acing this exam is far from easy but if you are determined to score well in this exam then the path ahead already becomes very easy.

In this blog post, we have tapped into one of the toughest subjects of this exam, economics. Further in this post there are also some study tips attached in the post that will be of help in achieving good marks in the exam.

Important economics topics of CFA level 1 exam

  • Topics in Demand and Supply Analysis – This chapter covers the concepts of elasticity, normal and inferior goods, while also a brief knowledge about the economies and diseconomies of scale. In this chapter, you will learn about several other concepts like breakeven points and shutdown points of production, and the choices that a business would make in the long run depending on factors like marginal cost, average variable cost, and average total cost.
  • The Firm and Market Structures – This chapter is one of the most important chapters of the CFA Level 1 economics exam and it discusses the characteristics of the four market structures that are prevalent in all economies, that is perfect competition, monopoly, monopolistic competition, and oligopoly. Studying this chapter will help you in comparing and contrasting the market structures while using some concentration measures for determining market power.
  • Aggregate Output, Prices, and Economic Growth – The focus of this chapter is on macroeconomics and using GDP for measuring aggregate economic output. The fundamental relationship and the aggregate demand-supply curves are introduced in this chapter.
  • Understanding Business Cycles – The indicators of unemployment and inflation are discussed in detail in the second half of the chapter while the first half concentrates on the different phases of a business cycle namely, expansion, peak, recession, and trough.
  • Monetary and Fiscal Policy – The general meaning of monetary policy is the actions of the central bank that affect both the quantity of money and the amount of credit in an economy. While fiscal policy means a government’s role in influencing economic activity by using spending and taxation.
  • Introduction to Geopolitics – This chapter focuses on various economic terminologies, the explanation of geopolitics, and its relationship with the process of globalization. This CFA Level 1 economics exam chapter also focuses on the tools which are used within geopolitics, and the impact of geopolitical risk.
  • International Trade and Capital Flows – In this chapter you will learn to compare gross domestic product and gross national product, without calculating the comparative and absolute advantage. You will also find different examples of trade restrictions, tariffs, quotas, trading blocs, and common markets in this important chapter.
  • Currency Exchange Rates – If you are someone who is looking for a CFA preparation course price and preparing to appear for the exam then this economics chapter is a must-read for you. It involves the study of exchange rates of currency, and its forward exchange rates in order to calculate the appreciation and depreciation of currency as well as its cross rates.

CFA Economics Study Tips

  • Adjust Your Expectation in terms of Prep Time – Don’t create a study timetable that even you know you won’t be able to achieve. Moreover, when you have a huge amount of study material to cover within a certain amount of time, it can become tougher. So, it is best to strategically create a study timetable according to your studying capacity and your general day-to-day routine. Tackle one chapter and concept at a time and slowly when one concept clicks you will see how easy the overall ride will become.
  • Aim to Understand the Logic – Before you search for a CFA preparation course price, have one thing set clear in your mind, randomly memorizing everything you read won’t help you in achieving good marks in this exam. This exam is all about understanding the basics behind the big words, so concentrate on doing that, concentrate on understanding the concepts and logic behind each and every chapter. Moreover, understanding the logic behind every concept will also come in handy if you have to tackle any question that you haven’t prepared from the study materials.
  • Study the Graphs – Graphs are an integral part of CFA Level 1 economics or just economics in general, and if you have ever studied with the help of a graph then we are quite sure that you have already noted a change between the effectivity of the study session. The graphs of any chapter of economics are nothing but a simplified and picturized form of what you have in writing so keep those graphs handy when you sit for your next study session.
  • Practice different questionnaires – You can ask anyone and you will hear the same advice, practice is the key to excellence. So take your time out from the usual studying and practice tons of questionnaires. Moreover, this will also help you in applying the different concepts to different scenarios.

Key takeaway

CFA Level 1 economics is a tough exam but if you practice hard and study following all the study tips and tactics then acing this exam won’t be that tough. If you are currently preparing for a CFA level 1 exam or planning to appear then the above-listed tips can be of great help.