What CFA Level 1 Economics actually tests
Economics is 6-9% of the Level 1 exam:
| Area | What it covers |
|---|---|
| Demand & Supply Analysis | Elasticities, consumer/producer surplus |
| Firm & Market Structures | Perfect competition, monopoly, oligopoly, monopolistic competition |
| Aggregate Output & Income | GDP, GNP, IS-LM framework, Keynesian vs. monetarist views |
| Business Cycles | Expansion, peak, contraction, trough, leading indicators |
| Monetary & Fiscal Policy | Money supply, money multiplier, Taylor rule, crowding out |
| International Trade | Comparative advantage, trade restrictions, balance of payments |
| Currency Exchange Rates | Spot/forward rates, purchasing power parity, interest rate parity, Fisher effect |
Why elasticity trips candidates up
Elasticity questions are simple in principle — a ratio of two percentage changes — but candidates lose marks on the sign and the interpretation, not the arithmetic. Demand elasticity is (almost) always negative, and whether demand is "elastic" or "inelastic" hinges on whether the magnitude is above or below 1 — a distinction that's easy to blur under exam-day time pressure.
Sample question: Price Elasticity of Demand
When the price of a good rises from $20 to $22, quantity demanded falls from 100 units to 92 units. Using the midpoint (arc) elasticity formula, what is the price elasticity of demand?
Midpoint elasticity = (ΔQ / average Q) / (ΔP / average P) = (−8 / 96) / (2 / 21) = −0.0833 / 0.0952 = −0.875. Since the magnitude (0.875) is less than 1, demand is inelastic over this range — a 10% price increase produced a smaller than 10% drop in quantity demanded.
The 2026 Economics syllabus, module by module
Pinnacle runs on a syllabus graph — named modules with explicit prerequisites, each one mapped against CFA Institute's official 2026 Level I topic outline. It is the same map the free diagnostic reasons over, not a marketing summary of it. These are the six confirmed Economics modules, and what each one covers:
The Firm & Market Structures
The four market structures — perfect competition, monopolistic competition, oligopoly and monopoly — and how firms behave in each.
Business Cycles
The phases of the business cycle, and how inflation, unemployment and economic indicators move through them.
Monetary & Fiscal Policy
Central bank tools and the money supply on one side, fiscal multipliers on the other — and how the two policies interact.
Introduction to Geopolitics
Geopolitics as an investment factor: cooperation and globalisation, the tools of geopolitics, and how geopolitical risk is assessed and transmitted into markets.
International Trade & Capital Flows
Comparative advantage, the effects of trade restrictions, and reading the balance of payments.
Currency Exchange Rates
Exchange rate quotes and cross rates, parity conditions, and calculating forward premiums.
For orientation against the official document: the 2026 Level I outline lists eight Economics modules — The Firm and Market Structures, Understanding Business Cycles, Fiscal Policy, Monetary Policy, Introduction to Geopolitics, International Trade, Capital Flows and the FX Market, and Exchange Rate Calculations. The six graph modules above track that same ground.
Verification against the outline also retired two legacy modules from the graph: the 2026 outline has no standalone demand-and-supply module — firm-level supply and demand survives inside The Firm and Market Structures — and no module on aggregate output, prices and economic growth. If your study materials still carry either as a separate Economics chapter, they predate the current outline.
Every practice question in the bank is tagged to one of these modules — which is how the diagnostic can name the specific concept underneath a wrong answer, not just the topic area it sat in.
Module names follow CFA Institute's published 2026 Level I topic outline, referenced for accuracy. Pinnacle is an independent adaptive learning platform. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. Pinnacle is not affiliated with, endorsed by, or connected to that organisation.