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. The Taylor Rule provides a prescription for the central bank policy rate based on: → Deviations of inflation from target and output from potential
2. Public goods are characterized by: → Non-rivalry and non-excludability
3. Real Business Cycle (RBC) theory attributes economic fluctuations primarily to: → Technology shocks and other real supply-side disturbances
4. Under a fixed exchange rate regime, a country that runs a persistent balance of payments deficit will eventually face: → Depletion of foreign reserves and potential forced devaluation
5. The Gauss-Markov theorem states that, under its classical assumptions, the OLS estimator is: → BLUE — Best Linear Unbiased Estimator
6. Instrumental variable (IV) estimation is used to address: → Endogeneity caused by reverse causality or omitted variables
7. According to the job search model, a higher unemployment insurance benefit tends to: → Raise unemployment duration by increasing reservation wages
8. 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.
9. Which economic concept explains why a country can specialize in and export a good even if another country can produce it more efficiently in absolute terms? → Comparative advantage
10. A country running a current account deficit must be running a: → Capital and financial account surplus
11. Under the fractional reserve banking system, the money multiplier in its simplest form equals: → 1 divided by the required reserve ratio
12. Consumer surplus is defined as the difference between: → The willingness to pay and the price actually paid
13. The 'golden rule' savings rate in the Solow model is the rate at which: → Consumption per worker is maximized in the steady state
14. The natural rate of unemployment includes: → Frictional and structural unemployment but not cyclical unemployment
15. What conditions define a recession in an economy? → If real GDP falls for two consecutive quarters.
16. Which of the aforementioned claims regarding the IS curve is untrue? → A fall in the interest rate will shift IS to the right.
17. In a difference-in-differences (DiD) estimator, the key identifying assumption is: → Parallel pre-treatment trends between treatment and control groups
18. Cross-validation in econometric modeling is used primarily to: → Assess out-of-sample predictive performance and avoid overfitting
19. In panel data analysis, fixed effects estimation controls for: → Time-invariant unobservable unit-specific heterogeneity
20. The Taylor Rule provides a benchmark for setting the federal funds rate based on: → Deviations of inflation from its target and output from potential
21. Which of the following claims regarding economic expansion is untrue? → Economic growth solves the economic problem.
22. Foreign Direct Investment (FDI) differs from portfolio investment primarily because FDI involves: → Controlling ownership interest in a foreign enterprise
23. Crowding out in fiscal policy refers to: → Deficit-financed spending raising interest rates and reducing private investment
24. 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
25. In the aggregate demand–aggregate supply (AD-AS) framework, stagflation is best represented as: → A leftward shift of the SRAS curve with unchanged AD
26. Under a fixed exchange rate regime, a central bank must intervene in currency markets to: → Maintain the pegged exchange rate
27. 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
28. The Roy model of self-selection predicts that workers will sort into occupations: → Based on their comparative advantage, where their relative productivity is highest
29. The R-squared statistic in regression measures: → The proportion of variance in Y explained by the model
30. Which statement best describes 'poverty traps' in development economics? → Self-reinforcing mechanisms where poverty itself creates barriers to escaping poverty