Economics
Core toolkit
Economics questions test a small set of models applied carefully. Start with scarcity, opportunity cost, marginal analysis, incentives, and the production possibilities frontier. Know comparative advantage and gains from trade, then supply and demand: determinants of demand (income, tastes, prices of substitutes and complements, expectations, number of buyers) and of supply (input costs, technology, taxes and subsidies, expectations, number of sellers). Distinguish a shift of a curve from a movement along it. Cover equilibrium, price ceilings and floors, elasticity, externalities, public goods, and market structures from perfect competition to monopoly. Macroeconomics includes GDP via the expenditure approach, real versus nominal values, CPI and inflation, types of unemployment, the natural rate, fiscal policy, monetary policy tools (open market operations, discount rate, reserve requirement), the money multiplier, and the Federal Reserve's dual mandate. Also review exchange rates and the balance of payments.
Traps
Students mix fiscal and monetary policy, treat nominal GDP growth as real growth, or count transfer payments as government spending in GDP. Another frequent error is assuming a price change shifts a curve rather than moving along it.
Rule of thumb
Ask whether a non-price determinant changed. If yes, the curve shifts; if only the good's own price changed, you move along the curve.
Worked example
"The price of a substitute good rises. What happens in the market for the original good?" Answer: demand shifts right, because consumers substitute toward the now relatively cheaper good. Supply is unchanged, so equilibrium price and quantity both rise.