Wow, I cannot get Econ for the life of me. Anyone have similar problems and cure themselves? 50% is an average score for me on the Econ section of my Schweser exams.

actually to add to that - does anyone have an easy way of remembering the differences between Keynesian, new Keynesian, and classical or should we just memorize those? i know monetarist = money, any shortcuts?

I’m still working on figuring out all the “marginal ________” terms. It seems like there is a hundred of them!

My econ average is around 70%, but I’m definitely in your boat. For some reason the aggregate/money demand and supply stuff will NOT stick with me. I’ve just been trying to blast through the macroeconomics qbank section and keep redoing the ones I can’t get. Having said that, I’ve accepted I wont ace this section, and have moved on to try and beef on on ethics/quant/FSA. In terms of the three economic viewpoints, I’ve sort of classified them in my own way and have seemed to fare well on those questions. New Keynesian I haven’t studied/heard of. Classical - think adjustment of money wages is rapid, see taxes/money supply control as an impediment to reaching long run equilibrium. Keynesian - wages downward sticky, takes a while to go from recession -> full emp. GDP. Thus, advocates monetary/fiscal policy help (any way possible) Monetarists - like you said, keep taxes low and have steady, predictable Ms increases

A bit of historical context may help! Consider the times of great depression. Whole world-economy was in deep recession. During that time, economists who developed all these fancy theoretical models (like aggregate demand/supply model), were expecting the world to follow their models and believed that the economy would recover on its own. Their view was like… Left alone, economy recovers on its own. There shud be minimum interruption from govt… either through fiscal policy or monetary policy. This is what is called CLASSICAL VIEW (just like a classic movie, based on pure principles, with out caring much abt realities) But that was not happening during the great depression. Economy continued to be in recession for years. It was not adjusting on its own! Than came these guys… John Maynard Keynes along with few others. They believed that if you leave it alone, economy would never recover on its own. Mainly because, as assumed by theory (classic view theory) wages won’t go down i.e. wages are down ward sticky. If wages don’t go down, companies won’t hire more people and hence there won’t be any increase in employment or GDP and hence the system would never come out of recession. Keynes believed that there should be active interference from govt… on both fiscal and monetary grounds. And, that’s what President Roosevelt did. Attacked the economy from both sides… taken monetary measures to increase the money input (like giving loans etc) into the system and some fiscal measures to decrease the money output (like reducing taxes) from the system. As a matter of fact, more or less, this is what President Obama is doing now. New-keynesians adds to keynesian view. They believe that, not only wages but also other prices are down-ward sticky. And, the third school-of-thought is of Monetary Economists’. As the name suggests they believe that govt should interfere… but mainly through monetary policies. They agree with classical view in terms of fiscal policy {Both believe that there shudn’t be much interference by govt, as far as fiscal policy is concerned (like changing tax rates)}. So, to summarize… Classical View - Don’t do any thing. No Fiscal or Monetary interference. World can take care of itself. Keynesian View - Do what ever you can or else nothing is gonna change. Attack from both Fiscal and Monetary grounds. New-Keynesian View - Just like Keynesians. They give more reasons to follow Keynesian way. Monetary view - As the name suggests… interfere actively through monetary policies. Don’t care about fiscal policy. I hope this helps.

wow man that was a helluva summary rammohan, i like the story telling format… gives it life. it has definitely stuck in my head, thank you for that.

I remember similar stories told in all the macroeconomic classes at the uni. If I am not mistaken Keynes was always kind of portrayed as a hero.

Rammohan, whao! how can I pay you for this lecture! Finally, it is seated in my head -:0). many thanks friend. best of luck.

I am an econ undergrad, and did pretty well in the econ section. I got 90+% overall on the CFAI mock, despite having spent the least amount of my study time on this section. I mention this to point out that - unlike ethics perhaps - econ isn’t voodoo. There is a system to it. Keep at it. It will start making sense.

I have the problems on Economics too!!Everybody taking or taken CFA L1 keeps telling me this part is the easiest part. I do think it’s easy when reading. But after I got into the practices, the results are very very horrible!!! Answers are guessed! Up to now, I’m scared to do Econ problems. So it’s just pending. I have an idea to re-reading the notes and do some notes by yourself to remember. And do some Q-bank problems. It must be helpful. I failed last Dec exam due to Econ!!! MrE2All Wrote: ------------------------------------------------------- > Wow, I cannot get Econ for the life of me. Anyone > have similar problems and cure themselves? 50% is > an average score for me on the Econ section of my > Schweser exams.

rammohan thanks man

The correct answer always has the word marginal in it.

To repeat a joke posted earlier: A student is sleeping in one of Milton Friedman’s classes. He is awoken abruptly by the Professor. “So, what is your answer, young man?”, professor Friedman repeats. “I don’t know what the question was, but my answer is to increase the money supply.” The student was correct.

Great post Ram…this really stuck in my head… Interestingly I was watching cnn’s GPS where they had an interesting discussion about how keynsian views are not valid anymore…they were at the time…but now new stratergies are needed to fight this new economic war… great stuff…I like the fact that this cfa ciriculum had made me so much more aware ( I had 0 fin/acc background.)

Thanks Ram…geat post…You made it so easy…

kosei Wrote: ------------------------------------------------------- > I failed last Dec exam due to Econ!!! WHHAAAT??? How did you score in other areas? rammohan - THANK YOU! awesome for you to take the time to post that helpful summary! ITAdmin - I feel so much more aware also, it’s a good feeling. kosei - I’m freaking out. would love to know what your other scores were. : )