MEcon Master of Economics Cheat Sheet 2026

The 30 highest-yield MEcon Master of Economics facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Public goods are characterized by: → Non-rivalry and non-excludability
2. The Gauss-Markov theorem states that, under its classical assumptions, the OLS estimator is: → BLUE — Best Linear Unbiased Estimator
3. Instrumental variable (IV) estimation is used to address: → Endogeneity caused by reverse causality or omitted variables
4. According to the job search model, a higher unemployment insurance benefit tends to: → Raise unemployment duration by increasing reservation wages
5. Which of the following scenarios would see a rise in real GDP while maintaining the same level of prices? → The aggregate demand and aggregate supply curves both shifted right by the same amount.
6. A country running a current account deficit must be running a: → Capital and financial account surplus
7. Consumer surplus is defined as the difference between: → The willingness to pay and the price actually paid
8. The natural rate of unemployment includes: → Frictional and structural unemployment but not cyclical unemployment
9. What conditions define a recession in an economy? → If real GDP falls for two consecutive quarters.
10. Which of the aforementioned claims regarding the IS curve is untrue? → A fall in the interest rate will shift IS to the right.
11. In a difference-in-differences (DiD) estimator, the key identifying assumption is: → Parallel pre-treatment trends between treatment and control groups
12. Cross-validation in econometric modeling is used primarily to: → Assess out-of-sample predictive performance and avoid overfitting
13. In panel data analysis, fixed effects estimation controls for: → Time-invariant unobservable unit-specific heterogeneity
14. Which of the following claims regarding economic expansion is untrue? → Economic growth solves the economic problem.
15. Foreign Direct Investment (FDI) differs from portfolio investment primarily because FDI involves: → Controlling ownership interest in a foreign enterprise
16. Crowding out in fiscal policy refers to: → Deficit-financed spending raising interest rates and reducing private investment
17. Omitted variable bias occurs when a relevant variable is excluded from a regression and that variable is: → Correlated with the error term and correlated with included regressors
18. Under a fixed exchange rate regime, a central bank must intervene in currency markets to: → Maintain the pegged exchange rate
19. The compensating wage differential theory predicts that jobs with higher risk or less desirable conditions will pay: → Higher wages to compensate workers for undesirable attributes
20. The Roy model of self-selection predicts that workers will sort into occupations: → Based on their comparative advantage, where their relative productivity is highest
21. The R-squared statistic in regression measures: → The proportion of variance in Y explained by the model
22. Which statement best describes 'poverty traps' in development economics? → Self-reinforcing mechanisms where poverty itself creates barriers to escaping poverty
23. W. Arthur Lewis's two-sector model of economic development assumes that: → Surplus labor in agriculture can shift to industry without raising wages above subsistence
24. In internal labor markets, wages are largely determined by: → Job ladders, seniority rules, and internal promotion mechanisms
25. The Hausman test is commonly used to choose between: → Fixed effects and random effects panel estimators
26. Automatic stabilizers in fiscal policy are government programs that: → Automatically increase spending or cut taxes during recessions without new legislation
27. Which market structure is characterized by many firms selling differentiated products with free entry and exit? → Monopolistic competition
28. Empirical estimates of the elasticity of labor demand suggest that a 10% increase in wages typically reduces employment by approximately: → 0.1–0.3 percent in the short run
29. 'Brain drain' in development economics describes: → Emigration of skilled and educated workers from developing to wealthier countries
30. The concept of 'fiscal multiplier' refers to the ratio of: → Change in GDP to the initial change in government expenditure