Tài liệu CFA Level I - Study Session 4 ppt

CFA Level I - Study Session 4

1. A. “Economic Fluctuations, Unemployment, and Inflation”

The candidate should be able to

a) explain the phases of the business cycle;

Business cycle is a description of the fluctuations in the general level of economic activity in an

economy as measured by changes variables such as real GDP, employment, and unemployment.

Business cycles consist of distinct phases:

Business Peak: When most businesses in the economy are operating at capacity, real GDP is growing

rapidly and unemployment has fallen. It is not sustainable over a long period and thus leads to;

Contraction: Aggregate business conditions slow, real GDP growth falls and may even turn negative,

and unemployment begins to rise.

Recessionary trough: Is the point at which the economic slowdown reaches its lowest. From this point

onward aggregate economic activity tends to rise;

Expansion: When aggregate economic activity completely recovers from the previous slowdown.

Real GDP growth rises, firms begin to increase their capacity utilization, and unemployment begins

to fall.

Business Cycle & Economic Sectors

Economic

Slowdown

Slowdown/

Recovery

Economic

Expansion

Expansion/

Peak

Economy Slowing Slow Growing Decelerating

Monetary Policy Neutral Easy Neutral Tight

Interest Rates Falling Falling Rising Rising

Profits Slowing Falling Rising Decelerating

Sector Groups Cons. Staples Consumer Basics Utilities

expected Finance Cyclicals Capital Goods

to do well Health Care Tech. &Energy

Stock Non-Cyclical Econ. Sensitive Cyclical Non-cyclical

Characteristics Blue Chip Visible Earnings Leveraged Visible Earnings

High Yield Growth Oriented High Growth High Yield

Level I SS4 Macroeconomics 2005 Page 1 of