Course Content
TOPICS IN DEMAND AND SUPPLY ANALYSIS
This chapter is covered under Reading 12 of Study Session 4. After reading this chapter, a student shall be able to: a. calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure; b. compare substitution and income effects; c. distinguish between normal goods and inferior goods; d. describe the phenomenon of diminishing marginal returns; e. determine and describe break-even and shutdown points of production; f. describe how economies of scale and diseconomies of scale affect costs.
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Demand Concept
Supply Concepts
Market Equilibrium
THE FIRM AND MARKET STRUCTURES
This chapter is covered in reading 13 of study session 4 of the material provided by the Institute. After reading this chapter, a student shall be able to: a. describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly; b. explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure; c. describe a firm’s supply function under each market structure; d. describe and determine the optimal price and output for firms under each market structure; e. explain factors affecting long-run equilibrium under each market structure; f. describe pricing strategy under each market structure; g. describe the use and limitations of concentration measures in identifying market structure; h. identify the type of market structure within which a firm operates.
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LOS A to G: Types of Market Structure
LOS H: Identification of Market Structure
AGGREGATE OUTPUT, PRICES, AND ECONOMIC GROWTH
This chapter is covered in reading 14 of study session 4 of the material provided by the Institute. After reading this chapter, a student shall be able to: a. calculate and explain gross domestic product (GDP) using expenditure and income approaches; b. compare the sum-of-value-added and value-of-final-output methods of calculating GDP; c. compare nominal and real GDP and calculate and interpret the GDP deflator; d. compare GDP, national income, personal income, and personal disposable income; e. explain the fundamental relationship among saving, investment, the fiscal balance, and the trade balance; f. explain the IS and LM curves and how they combine to generate the aggregate demand curve; g. explain the aggregate supply curve in the short run and long run; h. explain causes of movements along and shifts in aggregate demand and supply curves; i. describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle; j. distinguish between the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation; k. explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment; l. analyze the effect of combined changes in aggregate supply and demand on the economy; m. describe sources, measurement, and sustainability of economic growth; n. describe the production function approach to analyzing the sources of economic growth; o. distinguish between input growth and growth of total factor productivity as components of economic growth.
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Introduction
LOS A: Aggregate Output and Income
LOS B to E: Gross Domestic Product
LOS F to L: Aggregate Demand, Aggregate Supply & Equilibrium
LOS M, N, and O: Economic Growth and Sustainability
UNDERSTANDING BUSINESS CYCLES
This chapter is covered in reading 15 of study session 4 of the material provided by the Institute. After reading this chapter, a student shall be able to: a. describe the business cycle and its phases; b. describe how resource use, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle; c. describe theories of the business cycle; d. describe types of unemployment and compare measures of unemployment; e. explain inflation, hyperinflation, disinflation, and deflation; f. explain the construction of indexes used to measure inflation; g. compare inflation measures, including their uses and limitations; h. distinguish between cost-push and demand-pull inflation; i. interpret a set of economic indicators and describe their uses and limitations.
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LOS A and B: Overview of Business Cycle
LOS C: Theories of Business Cycle
LOS D: Unemployement
LOS E: Inflation
LOS I: Economic Indicators
MONETARY AND FISCAL POLICY
This chapter is covered in reading 16 of study session 5 of the material provided by the Institute. After reading this chapter, a student shall be able to: a. compare monetary and fiscal policy; b. describe functions and definitions of money; c. explain the money creation process; d. describe theories of the demand for and supply of money; e. describe the Fisher effect; f. describe roles and objectives of central banks; g. contrast the costs of expected and unexpected inflation; h. describe tools used to implement monetary policy; i. describe the monetary transmission mechanism; j. describe qualities of effective central banks; k. explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates; l. contrast the use of inflation, interest rate, and exchange rate targeting by central banks; m. determine whether a monetary policy is expansionary or contractionary; n. describe limitations of monetary policy; o. describe roles and objectives of fiscal policy; p. describe tools of fiscal policy, including their advantages and disadvantages; q. describe the arguments about whether the size of a national debt relative to GDP matters; r. explain the implementation of fiscal policy and difficulties of implementation; s. determine whether a fiscal policy is expansionary or contractionary; t. explain the interaction of monetary and fiscal policy.
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LOS A: Monetary Vs. Fiscal Policies
LOS B: Money
LOS C: Money Creation Process
LOS D: The Demand and Supply of Money
LOS E: Fisher Effect
LOS F: Role of Central Bank
LOS G: Cost of Inflation
LOS H: Policy Tools
LOS I, J, K, L, M, and N: Policies of The Central Bank
LOS O to S: Fiscal Policies
LOS T: Interaction of Fiscal and Monetary Policy
INTERNATIONAL TRADE AND CAPITAL FLOWS
This topic is covered under Reading 17 of the study session 5 provided by the institute. The candidate should be able to: a compare gross domestic product and gross national product; b describe benefits and costs of international trade; c distinguish between comparative advantage and absolute advantage; d compare the Ricardian and Heckscher–Ohlin models of trade and the source(s) of comparative advantage in each model; e compare types of trade and capital restrictions and their economic implications; f explain motivations for and advantages of trading blocs, common markets, and economic unions; g describe common objectives of capital restrictions imposed by governments; h describe the balance of payments accounts including their components; i explain how decisions by consumers, firms, and governments affect the balance of payments; j describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization.
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Introduction
LOS A: Some Basic Terminologies for International Trade and GDP, GNP
LOS B: Cost and Benefits of International Trade
LOS C: Comparative and Absolute Advantage
LOS D: Ricardian and Heckscher–Ohlin models
LOS E, F, and G: Trade and Capital Flow
LOS H and I: Balance of Payment
LOS J: Trade Organizations
CURRENCY EXCHANGE RATES
This chapter is covered in Reading 18 of the study material provided by the institute. After reading this chapter, the student should be able to: a. define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates; b. describe functions of and participants in the foreign exchange market; c. calculate and interpret the percentage change in a currency relative to another currency; d. calculate and interpret currency cross-rates; e. convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation; f. explain the arbitrage relationship between spot rates, forward rates, and interest rates; g. calculate and interpret a forward discount or premium; h. calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency; i. describe exchange rate regimes; j. explain the effects of exchange rates on countries’ international trade and capital flows.
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Introduction
LOS A: Real Exchange Rate Vs. Nominal Exchange Rate
LOS B: The Foriegn Exchange Market
LOS C: Appreciating or Depreciating Currency
LOS D: Currency Cross-Rates
LOS E to G: Forward Rate Quotations
LOS H: Exchange Rate Regimes
LOS J: Exchange Rate, International Trade, and Capital Flows
Economics
About Lesson

a.  Given three currencies, a currency cross-rate is the implied exchange rate of a third country pair given the exchange rates of two pairs of three currencies that have a common currency.

b.  For example, suppose we have the following exchange rates for three currencies:

A/B = 10 and B/C = 5

If we have to find the exchange rate between A and C, then we can do so as follows:

A/B × B/C = A/C = 10 × 5 = 50

c.  Taking another example, suppose we have another currency quotes:
P/Q = 50 and R/Q = 10
And if we have to find the quote for P/R, we can do so as follows:

P/Q × Q/R = P/R = 50 × 1/10 = 5

d.  If the relationship does not hold between the three currencies, as discussed above, it would be possible to arbitrage these three currencies to earn profits.

 

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