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AP Macroeconomics
MR. Graham
Preparing for the AP Exam
Module 44½:
What to Expect on the AP Exam
2
The Exam
• Multiple-Choice Section (2/3 of final score)
– 60 questions, 70 minutes
– Plan on answering 15 questions per 15 minutes—
write timing on your test
– TIPS:
• Select the best answer
• Answer easy questions first
• Skip questions that are completely unfamiliar
• No “guessing penalty,” so don’t leave any blank
The Exam
• Multiple-Choice Section (2/3 of final score)
– Basic Economic Concepts
8-12%
– Measurement of Economic Performance
12-16%
– National Income and Price Determination
10-15%
– Financial Sector
15-20%
– Stabilization Policies
20-30%
– Economic Growth
5-10%
– International Trade and Finance
10-15%
The Exam
• Free-Response Section (1/3 of score)
– 3 questions, 60 minutes
(including 10-minute reading period)
– Plan on spending 25 minutes answering question 1
and 12.5 minutes answering questions 2 and 3—
write timing on your test
– TIPS:
• Models can provide or enhance an explanation
to be correctly labeled)
• Number your responses (e.g. “2 (c) ii”)
• Answer need to be definite and consistent
(need
2009 AP MACROECONOMICS FREE-RESPONSE QUESTION
The Exam
2009 AP Macroeconomics Free-Response Question
• What are students asked to do?
– (a) Using model, show…
– (b) Calculate.
– (c) What OMO?
– (d) Using model, show…
– (e) How will…? Explain.
– (f) What will happen to: i) and ii)? Explain.
The Exam
2009 AP Macroeconomics Free-Response Question
• Guess how many points for each part?
 (a) Using model, show…
 (a) 2 points
 (b) Calculate.
 (b) 1 point
 (c) What OMO?
 (c) 1 point
 (d) Using model, show…
 (d) 2 points
 (e) How will…? Explain.
 (e) 2 points
 (f) What will happen to: i) and ii)? Explain.
 (f) 3 points
Scoring Breakdown
• Multiple-Choice Section
– 60 points (1 point per question)
• Free-Response Section
– 30 points (15 points for 1, 7.5 points for 2 and 3)
AP Score Conversion Chart Macroeconomics (2000)
Composite Score Range
AP Score
72-90
5
58-71
4
50-57
3
36-49
2
0-35
1
Module 44¾:
All the Graphs You Need to Know
12
The Circular-Flow Diagram
The Production Possibilities Curve
Long-Run Macroeconomic Equilibrium
The Money Market
The Loanable Funds Market
The Foreign Exchange Market
Module 45:
Putting It All Together
19
A Starting Point
• To analyze any situation, you have to know
where to start…
The Pivotal Event
– This might be a
change in the
economy or a policy
response to the
“starting point”.
The Initial Effect of the Event
– The “pivotal event” will generally have some
initial, short-run effects.
The Long-Run Effects of the Event
– We know that in the long run, monetary policy
affects only the aggregate price level, not real
GDP.
– Because money is neutral, changes in the
money supply have no effect on the real
economy.
– The aggregate price level and nominal values
will be affected by the same proportion, leaving
real values (including the real interest rate as
mentioned in our scenario) unchanged.
Analyzing our Scenario
Sample Question—“A Structure for Macroeconomic Analysis”
• What are students asked to do?
1. Using model, show…
2. What OMO?
3. Using model, show…
4. Using model, show…Explain.
5. Using model, show…
6. What will…?
7. How will…? Explain.
Analyzing Our Scenario
1. “Draw a correctly labeled graph showing aggregate demand,
short-run aggregate supply, long-run aggregate supply,
equilibrium output, and the aggregate price level”
2.
“Identify the open-market operation the Fed would conduct”
 The Fed would sell U.S. Treasury securities
Analyzing Our Scenario
3. “Draw a correctly labeled graph of the money market to show the
effect of the monetary policy on the nominal interest rate.”
Analyzing Our Scenario
4.
“Show and explain how
the Fed’s actions will
affect equilibrium in the
aggregate demand and
supply graph you drew
previously. Indicate the
new aggregate price
level on your graph.”
 A higher interest rate will lead to decreased investment and
consumer spending, decreasing aggregate demand. The
equilibrium price level and real GDP will fall
Analyzing Our Scenario
5. “Draw a correctly labeled
graph of the foreign
exchange market for the
U.S. dollar showing how
the change in the
aggregate price level you
indicate on your graph
above will affect the
foreign exchange market.”
 The decrease in the U.S. price level will make U.S. exports
relatively inexpensive for Canadians to purchase and lead to
an increase in demand for U.S. dollars with which to
purchase those exports
Analyzing Our Scenario
6. “What will happen to the U.S. dollar relative to the
Canadian dollar?”
– The U.S. dollar will appreciate.
7. “How will the Federal Reserve’s contractionary monetary
policy affect the real interest rate in the United States?
Explain.”
– There will be no effect on the real interest rate in
the long run because, due to the neutrality of
money, changes in the money supply do not affect
real values in the long run.