V2 Economics Errata: Market Structures, Policy, Trade, and Currency Regimes

1. Module 1 — Oligopoly Products Are Not Always Homogeneous

Curriculum location: Characteristics of Market Structures, Exhibit 13, p. 23.

The Oligopoly row describes the degree of product differentiation as:

"Homogeneous/ Standardized"

That cell omits differentiated oligopoly products. The same row lists advertising and product differentiation as non-price competition, and the later Oligopoly section gives branded breakfast cereals and beverages as differentiated examples. The defining features are a few interdependent sellers and high entry barriers; product homogeneity is not required.

Correct reading: Oligopoly products may be homogeneous or standardized, or they may be differentiated close substitutes.

Candidates should not rule out oligopoly merely because firms compete through branding, features, or advertising.

2. Module 1 — The Equilibrium Introduction Incorrectly Imposes Zero-Profit Conditions

Curriculum location: Oligopoly, The Nash Equilibrium, p. 34.

After referring to “the previous analysis,” the introductory paragraph states two general market-equilibrium conditions:

"Existing firms are earning a normal return (zero economic profit)"

"price equals the average cost of production"

Those are not universal market-equilibrium conditions. They can arise in particular long-run free-entry settings, but the preceding analysis includes Cournot and monopoly, and the surrounding Oligopoly discussion expressly allows substantial and long-run economic profits. The positive-profit Nash outcome on the next page supplies another direct counterexample.

Correct reading: Equilibrium conditions depend on the model. Zero economic profit and price equal to average cost are not universal requirements. Nash equilibrium separately requires that no participant can improve its payoff through a unilateral change, given the strategies of the others.

Candidates should apply zero-profit and price-cost conditions only when the market structure and long-run entry assumptions support them.

3. Module 1 — The Cournot Summary Switches to a Leader-Follower Model

Curriculum location: Oligopoly, Optimal Price and Output in Oligopoly Markets, p. 38.

One sentence first says:

"each firm assumes that the other firms will not alter their output"

but then attaches that assumption to events:

"following the dominant firm's selection of its price and output level"

The first clause is the Cournot quantity assumption; the second adds a dominant first mover. Cournot firms choose quantities simultaneously, each treating rivals' quantities as fixed. A leader choosing first and followers responding afterward is the sequential Stackelberg structure, which the module separately identifies.

Correct reading: In Cournot competition, each firm chooses its output while treating rivals' output choices as fixed; no dominant firm is assumed to move first.

Candidates can distinguish the models by timing: simultaneous quantity choice for Cournot, sequential leader-follower choice for Stackelberg.

4. Module 1 — Elastic Market Demand Does Not Prove Perfect Competition

Curriculum location: Market Structure Identification and Concentration Measures, Econometric Approaches, p. 41.

"If demand is very elastic, the market must be very close to perfect competition."

Aggregate market demand elasticity does not by itself identify the market structure or an individual firm's pricing power. Firm market power depends on the residual demand the firm faces after accounting for customer substitution and rivals' supply responses. A competitive market can have inelastic aggregate demand, while a firm with market power can still operate where market demand is elastic.

Correct reading: Aggregate market demand elasticity alone does not establish market structure or an individual firm's market power. Firm-level analysis must consider the residual demand facing the firm after customer substitution and rivals' supply responses.

Candidates should identify which demand curve is being estimated before drawing a competition conclusion.

5. Module 3 — The Supply-Constraint Bullet Says Fiscal Expansion Does Not Add to Demand

Curriculum location: Fiscal Policy Implementation, Difficulties in Executing Fiscal Policy, p. 100.

In discussing a fiscal expansion when productive factors are constrained, the text says:

"discretionary fiscal policy will not add to demand and will be ineffective"

The constraint limits the economy's ability to produce more real output; it does not remove the initial increase in aggregate demand from expansionary spending or tax measures. The same passage warns of inflationary pressure, which arises because stronger nominal demand meets a constrained real supply response.

Correct reading: When supply constraints bind, fiscal expansion may raise aggregate demand without increasing real output, making the policy ineffective at raising real activity and increasing inflation pressure.

Candidates should keep the two effects separate: demand can rise even when real output cannot.

6. Module 4 — Exhibit 5 Turns 2% Point Targets into a Ceiling or Ranges

Curriculum location: Monetary Policy Objectives, Exhibit 5, pp. 118–119.

The table describes three inflation frameworks as follows:

"ECB's target is CPI inflation close to, but below, a ceiling of 2%."

"Riksbank's target is CPI inflation within $\pm 1.0$ percentage point of 2%."

"Bank of England's target is CPI inflation within $\pm 1.0$ percentage point of 2%."

All three descriptions misstate the target itself:

• The ECB has used a symmetric 2% medium-term target since its 2021 strategy review, measured by the Harmonised Index of Consumer Prices (HICP). It is not a below-2% ceiling.
• The Riksbank targets 2% inflation measured by CPIF. Its 1–3% variation band illustrates normal outcomes around the target; the Riksbank expressly says it is not a target interval.
• The Bank of England targets 2% CPI inflation. A deviation of more than 1 percentage point triggers an explanatory letter to the government; it does not turn the target into a 1–3% range.

Correct reading: Distinguish a numerical point target from the measure used and from any variation or accountability band. The ECB targets symmetric 2% HICP inflation, the Riksbank targets 2% CPIF inflation, and the Bank of England targets 2% CPI inflation.

Candidates should not treat every band around 2% as the target. A band may describe tolerated variation or trigger accountability while the target remains a point objective.

7. Module 4 — The Curriculum Incorrectly Denies Explicit BoJ and Fed Inflation Targets

Curriculum location: Monetary Policy Objectives, The Main Exceptions to the Inflation-Targeting Rule, p. 121.

The Bank of Japan section says that it:

"does not target an explicit measure of inflation."

The Federal Reserve section similarly says that it:

"does not have an explicit inflation target."

Both denials are incorrect. The Bank of Japan set a 2% year-on-year CPI price-stability target in January 2013. The Federal Open Market Committee has formally specified a 2% longer-run inflation goal since January 2012, measured by the annual change in the PCE price index and pursued alongside maximum employment.

Correct reading: The BoJ has an explicit 2% CPI price-stability target. The FOMC has an explicit 2% longer-run goal measured by annual headline PCE inflation, pursued alongside maximum employment under its dual mandate.

Candidates should distinguish having a target from consistently achieving it or pursuing it alongside another mandate. Persistent undershooting or a dual mandate does not mean that an explicit numerical objective is absent.

8. Module 5 — Semiconductor Production Is Not Concentrated in China Alone

Curriculum location: Forces of Globalization, COVID-19 semiconductor shortage discussion, p. 158.

"Semiconductor production is highly concentrated in China"

The sentence turns a regionally concentrated supply chain into a China-only production story. Contemporaneous fabrication-capacity data place Taiwan and South Korea ahead of China, while the most advanced capacity was concentrated in Taiwan and South Korea. China was important, but it was not the single center described by the curriculum.

Correct reading: Semiconductor production was geographically concentrated across East Asia, with major fabrication capacity in Taiwan, South Korea, Japan, and China and leading-edge capacity especially concentrated in Taiwan and South Korea.

Candidates should identify the actual geographic and segment concentration before assessing supply-chain exposure or diversification.

9. Module 5 — Practice Problem 4 Calls Unmoved Canadian Production Reshoring

Curriculum location: Forces of Globalization, Reshoring the essentials, p. 159.

"may relocate back to their home countries."

Curriculum location: Forces of Globalization, Practice Problem 4, p. 189.

"made at its existing Canadian facility"

Curriculum location: Forces of Globalization, Practice Problem 4 solution, p. 191.

"relocating to home countries via reshoring."

The curriculum's definition requires production to move back to the company's home country. The item instead keeps production at an existing Canadian facility and changes only the inventory held for US customers. Economic integration under USMCA does not turn Canada into the United States or supply the missing relocation, so choice A is not supported and none of the three choices precisely fits the facts.

Correct reading: Reshoring requires an actual transfer of production back to the home country. To make choice A valid, the fact pattern must say that production moves to the United States; otherwise the choices and solution must be rewritten around the tactic the facts actually describe.

Candidates should test whether a supply-chain action changes production location, duplicates capacity, or deepens a market commitment before selecting a deglobalization tactic.

10. Module 5 — IMF Lending Is Not Funded by a Gold Pool

Curriculum location: International Trade Organizations, Role of the International Monetary Fund, p. 160.

"A pool of gold and currencies contributed by members provides the IMF with the resources required for these lending operations."

This present-tense description conflates the IMF's historical gold-based subscription system with its lending resources. Quota subscriptions are the primary source of general lending resources, supplemented by multilateral and bilateral borrowing arrangements. Gold remains a reserve asset with restricted uses; it is not the ordinary pool financing IMF lending.

Correct reading: IMF general lending is financed primarily from member quota resources and may be supplemented by multilateral and bilateral borrowing. IMF gold should be described separately as a reserve asset, not as the pool used for ordinary lending.

Candidates should distinguish an institution's lending resources from reserve assets and from historical subscription arrangements.

11. Module 5 — NATO Is Not an Alliance Between the EU and Three Countries

Curriculum location: The Tools of Geopolitics, NATO case study, p. 174.

"NATO, an alliance between the European Union, United States, United Kingdom, and Canada"

The European Union is a separate organization and is not a NATO member. NATO is a transatlantic alliance of sovereign member countries across Europe and North America; reducing it to the EU plus three countries misstates both the actors and the alliance's membership structure.

Correct reading: NATO is an alliance of sovereign member countries in Europe and North America. The European Union is a distinct partner organization, not a NATO member.

Candidates should keep international organizations and their sovereign members distinct when classifying geopolitical actors and cooperative security tools.

12. Module 7 — The Smithsonian Agreement Did Not Create the Floating-Rate System

Curriculum location: Historical Perspective on Currency Regimes, p. 233.

The curriculum attributes the move to floating rates to the Smithsonian framework:

"most nations abandoned the Bretton Woods system in favor of a flexible exchange rate system under what are known as the Smithsonian Agreements."

The December 1971 Smithsonian Agreement was a short-lived attempt to restore fixed central rates with wider bands. It failed, and the major currencies were floating by March 1973. The agreement therefore did not name or create the flexible-rate system that followed its collapse.

Correct reading: The Smithsonian Agreement was a December 1971 fixed-rate realignment; generalized floating followed its collapse in 1973.

For exam reasoning, classify an arrangement by its operating commitment. A wider fixed band is still a fixed-rate framework, not a floating regime.

13. Module 7 — The 1979 ERM Was Not Initially Called the Currency Snake

Curriculum location: Historical Perspective on Currency Regimes, p. 234.

The curriculum treats the 1979 European Exchange Rate Mechanism as the system initially called the currency snake:

"Initially, the system called for European currency values to fluctuate within a narrow band called “the snake,”"

The currency snake began in 1972 as an earlier European limited-flexibility arrangement. The European Monetary System and its Exchange Rate Mechanism followed in March 1979, after the snake had largely disintegrated. They are successive arrangements, not two names for the same system.

Correct reading: Europe's currency snake began in 1972 and preceded the EMS/ERM, which began operating in March 1979.

For exam reasoning, a predecessor can share a narrow-band design with its successor without being the same named mechanism.

14. Module 7 — Exhibit 6 Cannot Be a 30 April 2008 Classification Snapshot

Curriculum location: A Taxonomy of Currency Regimes, Exhibit 6, p. 235.

The exhibit is explicitly titled:

"Exhibit 6: Exchange Rate Regimes for Selected Economies as of 30 April 2008"

Yet its monetary-union cell labeled “EMU” includes these continuous entries:

"Estonia, Finland, France,"

"Latvia, Luxembourg, Lithuania,"

"Malta, Netherlands, Portugal, Slovak Rep., Slovenia, Spain"

The table is internally inconsistent before any external chronology is needed: it also lists the Slovak Republic under “Target zone,” assigning one economy to two mutually exclusive regimes at the stated date. The adoption dates corroborate the mismatch: Slovakia adopted the euro in 2009, Estonia in 2011, Latvia in 2014, and Lithuania in 2015.

Correct reading: Do not treat Exhibit 6 as an IMF snapshot for 30 April 2008. A date-consistent table must exclude later euro adopters from the euro-area monetary-union row for 2008 and must not assign the same economy to both that row and a target-zone regime.

The reusable lesson is to check that a regime table has one observation date and mutually exclusive classifications before using country rows as evidence for the taxonomy.

15. Module 8 — Example 2 Treats Actual/360 as Universal Rather Than Conditional

Curriculum location: Forward Rate Calculations, Forward Discounts and Premiums, p. 260.

"The day count convention for Libor deposits is actual/360."

Curriculum location: Forward Rate Calculations, Example 2, Question 5 solution, pp. 262–263.

"C is correct, because the forward rate is calculated as:"

$$F_{\frac{\mathrm{GBP}}{\mathrm{EUR}}}=S_{\frac{\mathrm{GBP}}{\mathrm{EUR}}}\left(\frac{1+r_{\mathrm{GBP}}\left[\frac{\text{Actual}}{360}\right]}{1+r_{\mathrm{EUR}}\left[\frac{\text{Actual}}{360}\right]}\right)=0.8489\left(\frac{1+0.01325\left[\frac{270}{360}\right]}{1+0.01370\left[\frac{270}{360}\right]}\right)=0.84862$$

The curriculum states actual/360 as a universal Libor convention and then applies one $270/360$ fraction to both named currencies. That general rule is false: ICE Benchmark Administration specifies 365 days for GBP and 360 days for the other Libor currencies, while the Bank of England likewise lists GBP as ACT/365 and EUR as ACT/360.

The displayed arithmetic is nevertheless correct under a different setup: both annualized deposit rates must be explicitly quoted on a common ACT/360 basis. With that condition stated, the calculation still gives about $-2.8$ points and C remains correct. If the labels are instead read literally as historical GBP and EUR Libor, the currency-specific bases give about $-3.98$ points and B would be closest. That comparison exposes the setup error; it does not require changing the printed answer once the common-basis assumption is made explicit.

Correct reading: In general, use $F_{f/d}=S_{f/d}(1+r_f{\tau }_f)/(1+r_d{\tau }_d)$, with a separate day-count fraction for each quoted rate. Set ${\tau }_f={\tau }_d$ only when both rates explicitly share the same basis. Read Example 2, Question 5 as using hypothetical annualized GBP and EUR deposit rates quoted on a common ACT/360 basis; under that corrected setup, approximately $-2.8$ points and C remain correct.

For a candidate, the transferable lesson is to preserve each rate's accrual basis and use one maturity fraction only when the problem expressly supplies a common basis.

Complete Economics Errata Index

Scope: Modules 1, 3–5, 7–8, pp. 3–48, 79–192, and 213–266 (printed page numbers).

Reviewed modules. Module 1, pp. 3–48; Module 3, pp. 79–104; Module 4, pp. 105–140; Module 5, pp. 141–192; Module 7, pp. 213–249; and Module 8, pp. 251–266, including the exhibits, examples, and printed Practice Problems and solutions inside those pages.

What this review covers. Errors in the printed curriculum that would change a candidate's answer or understanding: wrong numbers, wrong formulas, reversed logic, and statements that contradict the volume's own data. It does not list spelling mistakes, equation-numbering slips, or wording that is loose but defensible.

The table lists every high-value, objectively confirmed curriculum error admitted for these modules. Repeated instances of the same defect are consolidated into one row. Extraction or import-fidelity problems, disputed readings, and low-value editorial issues are outside the public errata scope.

References

• John F. Nash Jr., “Non-Cooperative Games”
• MIT OpenCourseWare: Cournot and Stackelberg Competition
• U.S. Department of Justice: Monopoly Power and Market Power in Antitrust Law
• International Monetary Fund: How Fiscal Restraint Can Help Fight Inflation
• European Central Bank: 2021 Monetary Policy Strategy
• Sveriges Riksbank: The Inflation Target
• UK Government: Monetary Policy Remit
• Bank of Japan: Price Stability Target of 2 Percent
• Federal Reserve: Statement on Longer-Run Goals and Monetary Policy Strategy
• Semiconductor Industry Association: Strengthening the Global Semiconductor Supply Chain
• International Monetary Fund: Financial Operations
• NATO: Introduction to NATO
• Federal Reserve History: The Smithsonian Agreement and Its Collapse
• EUR-Lex: From the 1972 Currency Snake to the 1979 European Monetary System
• European Union Publications Office: Euro-Area Adoption Dates
• ICE Benchmark Administration — LIBOR: Frequently Asked Questions
• Bank of England — The UK Money Markets Code

This article is an independent candidate-focused analysis of confirmed errors in the CFA Level I 2027 Curriculum, Volume 2 Economics, Modules 1, 3–5, and 7–8. It is not an official CFA Institute errata notice, and inclusion here must not be read as CFA Institute confirmation, endorsement, or approval.