Economics at Level I bridges microeconomics (firm and market behaviour), macroeconomics (aggregate output, inflation, monetary and fiscal policy), and international economics (exchange rates, current account, business cycles). Questions frequently test the qualitative direction of effects rather than precise calculations — making conceptual fluency more important than formula memorisation for most sub-topics.
Market structures: know the four types (perfect competition, monopolistic competition, oligopoly, monopoly) and their characteristics — number of firms, barriers to entry, pricing power, long-run profit.
Monetary policy tools: open market operations (most commonly used), discount rate, reserve requirements. Expansionary policy → lower rates → higher output and prices.
Business cycle phases: expansion, peak, contraction (recession), trough. Know which indicators are leading (e.g. stock prices, yield curve slope, new orders), coincident, and lagging (e.g. unemployment, CPI).
Exchange rate quotations: distinguish direct vs. indirect quotes and bid–ask spreads. Know that the dealer always buys low (bid) and sells high (ask) in terms of the base currency.
Confusing a movement along a demand curve (change in price) with a shift of the demand curve (change in any other variable). Only a price change causes movement along the curve.
Misidentifying the J-curve effect: after a currency depreciation, the trade balance typically worsens short-term before improving, because quantities adjust slowly while prices adjust quickly.
Mixing up the current account and financial account: goods/services/income/transfers flow through the current account; capital and financial investments flow through the financial/capital account.
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