Preparing for the AP Exam

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AP Macroeconomics MR. Graham
Preparing for the AP Exam
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Module 44½ What to Expect on the AP Exam
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The Exam

• Multiple-Choice Section (2/3 of final score)
• 60 questions, 70 minutes
• Plan on answering 15 questions per 15
  minuteswrite timing on your test
• TIPS
• Select the best answer
• Answer easy questions first
• Skip questions that are completely unfamiliar
• No guessing penalty, so dont leave any blank

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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

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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
  (need to be correctly labeled)
• Number your responses (e.g. 2 (c) ii)
• Answer need to be definite and consistent

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2009 AP MACROECONOMICS FREE-RESPONSE QUESTION
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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.

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The Exam

• 2009 AP Macroeconomics Free-Response Question
• Guess how many points for each part?

• (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.

• (a) 2 points
• (b) 1 point
• (c) 1 point
• (d) 2 points
• (e) 2 points
• (f) 3 points

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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) 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
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Module 44¾ All the Graphs You Need to Know
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The Circular-Flow Diagram
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The Production Possibilities Curve
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Long-Run Macroeconomic Equilibrium
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The Money Market
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The Loanable Funds Market
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The Foreign Exchange Market
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Module 45 Putting It All Together
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A Starting Point

• To analyze any situation, you have to know where
  to start

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The Pivotal Event

• This might be a change in the economy or a policy
  response to the starting point.

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The Initial Effect of the Event

• The pivotal event will generally have some
  initial, short-run effects.

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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.

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Analyzing our Scenario

• Sample QuestionA Structure for Macroeconomic
  Analysis
• What are students asked to do?
• Using model, show
• What OMO?
• Using model, show
• Using model, showExplain.
• Using model, show
• What will?
• How will? Explain.

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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

• Identify the open-market operation the Fed would
  conduct
• The Fed would sell U.S. Treasury securities

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Analyzing Our Scenario

1. Draw a correctly labeled graph of the money
   market to show the effect of the monetary policy
   on the nominal interest rate.

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Analyzing Our Scenario

1. Show and explain how the Feds 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

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Analyzing Our Scenario

1. 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

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Analyzing Our Scenario

• What will happen to the U.S. dollar relative to
  the Canadian dollar?
• The U.S. dollar will appreciate.
• How will the Federal Reserves 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.