The key Economics formulas and decision rules for 2026, module by module. Economics is 6-9% of the Level I exam.
Free to read, no sign-up. A revision companion to use alongside your curriculum or prep provider. The full sheet (45 concepts, 18 formulas, 8 decision rules) is in the study dashboard.
The ones to know cold before exam day.
Where: MPC = marginal propensity to consume, t = tax rate
Open the lessonWhere: Approximate relationship
Open the lessonWhere: Multiply rates to find the cross rate
Open the lessonKey concepts and formulas from each of the 8 Economics modules. Open a module for its lesson page, or the dashboard for the full sheet.
Many firms, identical products, no barriers to entry. Price takers. P = MR = MC in long run. Zero economic profit in LR.
Many firms, differentiated products, low barriers. Downward-sloping demand. Zero economic profit in LR due to entry.
Where: MR = marginal revenue, MC = marginal cost
Where: P = price, Q = quantity
Full sheet: 7 concepts · 6 formulas · 1 decision rules
Expansion (trough to peak), Peak, Contraction/Recession (peak to trough), Trough. GDP growth fluctuates around trend.
Expansion: easy credit, rising asset prices. Contraction: tightening, deleveraging. Credit cycles amplify business cycles.
Full sheet: 5 concepts · 1 decision rules
Government spending and taxation. Expansionary: increase spending / cut taxes. Contractionary: cut spending / raise taxes.
The amplified impact of government spending on GDP. Multiplier = 1 / (1 - MPC × (1-t)). Higher MPC = larger multiplier.
Where: MPC = marginal propensity to consume, t = tax rate
Where: Smaller in absolute value than spending multiplier
Full sheet: 6 concepts · 3 formulas · 1 decision rules
Lender of last resort, banker to government, monetary policy implementation, financial system regulation, payments system oversight.
The short-term interest rate set by the central bank (e.g., Fed Funds rate). Primary tool of conventional monetary policy.
Where: Approximate relationship
Where: M = money supply, V = velocity, P = price level, Y = real output
Full sheet: 6 concepts · 3 formulas · 1 decision rules
Risk from political events, conflicts, sanctions, and policy changes that affect investment returns and economic activity.
Trade liberalization, capital flows, technology diffusion, labor mobility. Benefits: efficiency, growth. Costs: inequality, dependency.
Full sheet: 5 concepts · 1 decision rules
A country should produce goods where its opportunity cost is lowest. Even if one country is better at everything, both benefit from trade.
Ability to produce a good using fewer resources. Less important than comparative advantage for determining trade patterns.
Where: Improvement if ToT rises (exports become more valuable relative to imports)
Full sheet: 5 concepts · 1 formulas · 1 decision rules
Current account (trade, income, transfers) + Capital account + Financial account = 0. CA deficit = net capital inflow.
Goods trade balance + services + primary income (investment) + secondary income (transfers). Deficit = spending > income.
Where: When one account is in deficit, another must be in surplus
Full sheet: 5 concepts · 1 formulas · 1 decision rules
Direct: domestic per foreign (e.g., 1.25 USD/EUR). Indirect: foreign per domestic. Price/Base convention: P/B.
Dealer buys at bid, sells at ask. Spread = ask - bid. Always buy high (ask) and sell low (bid) from YOUR perspective.
Where: Multiply rates to find the cross rate
Where: F = forward, S = spot, r = interest rate for the period
Full sheet: 6 concepts · 4 formulas · 1 decision rules
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