Free-Response Problems

Some students are pressed for time on this type of exam question; therefore, the teacher should practice timed free-response writings throughout the course. The free-response is not a formal essay; it resembles most closely analytical or technical writing.

Answer Free-Response Questions: Tips for Students

  1. Do not restate the question.
  2. Use correct terminology. For example, money and income are often confused, or aggregate demand will be labeled “D,” and discussed as though it were the market demand for a particular product. Learn and use the correct language of macroeconomics.
  3. If the question requires you to draw a graph, you must do so to receive full credit. Even if a graph is not required, it may be to your advantage to draw one anyway. Often students use the wrong economic terminology, but clearly indicate they understand what is happening by using a correct graph. On the other hand, graphs are not magical tools that ensure high scores; they are useful tools in making arguments, but they don’t stand alone. It is important that the story they tell is explained.
  4. Label graphs clearly, correctly, and fully.

Points are lost when readers can’t figure out what you’re trying to explain with a graph that isn’t labeled correctly. Take particular care to label each axis and to identify each curve on the graph. Changes in curves should be indicated clearly with arrows or with some clear sequencing, such as showing a change in aggregate supply with AS and AS’ or AS1 and AS2.

  1. Use the same outline numbers or letters from the question in your answer, and answer them in the same order.

This helps the faculty consultant know where to look for specific answers to specific parts of the question. It also helps you remember to include all parts of the question in your answer.

Many free-response questions are divided into parts such as (a), (b), (c), and (d), with each part calling for a different response. Credit for each of these parts is awarded independently, so you should attempt to answer them all. If the answer to a later part of a question depends on the answer to an earlier part, you may still be able to receive full credit for the later part, even if the earlier answer is wrong. For example, you may receive no credit for your answer to part (a), but still receive full credit for parts (b), (c), and (d), as long as these answers are logically consistent with the answer to part (a).

The different parts of the free-response questions are presented in a logical manner; answer the parts in the order that they are asked.

  1. Emphasize the line of reasoning that generated your answer.

If you make an assertion such as “the price increased,” explain why the price increased.

  1. Use any available reading period to plan your answer.

Then you will have time to answer all three questions in the free-response segment. Allocate your time appropriately for the weighting of the questions asked.

  1. Remember that you may answer the questions in any order.

For instance, you may wish to answer the question you feel most confident about first. However, be sure to indicate clearly in your answer booklet which question you are answering.

  1. Identify what you may or may not bring to your exam (e.g. rulers, calculators, etc.). Bring only those things that are required and allowed.

Common Problems in Macroeconomics

  • Graphing Problems: Mislabeled and missing completely
  • Long Run and Short Run: Assume short run unless noted as long run
  • Money vs Income Confusion

Money is stock concept, $50.00 in you wallet

Income is attached to time, $5000 monthly salary

  • Linking a Change in Investment to Both AD and AS

AD moves upward with investment-net or replacement

AS moves upward to show growth when the investment is for new capital stock

  • Interest Rate Effect on Foreign Exchange

Higher interest rate relative to other countries leads to increased demand for a country’s currency, cash flows increase and this leads to appreciation

Lower interest rate relative to other countries leads to decreased demand for a country’s currency, cash flows decrease and this leads to depreciation

  • Monetary vs Fiscal Policy

Monetary-changes in discount or federal funds rate, or legal reserve or open market operations (FED)

Fiscal-spending and taxation (Congress)

  • Nominal versus Real

GDP- nominal (current $$) versus real (adjusted for inflation)

Income or wage- nominal (earned) versus real (purchasing power)

Interest rates- real equals nominal minus inflation

If nominal rates increase and price levels increase, the change in real rates is indeterminate

  • International Trade

How the change in the demand for one currency will affect the other currency?

How does appreciation and depreciation affect exports and imports?

  • Incomplete Linkages

Assertions without explanation- if personal income taxes fall, exports will fall

Use of transmission mechanisms

Change in Discount rate  change in MS  change in ir%  change C, change I  change AD. This can change RGDP, P. The change in I might lead to a change in capital stock and a change in LRAS.

  • Crowding-Out Effect and Fiscal Policy

Increases in government spending can cause crowding-out effect

Fiscal Policy effects can be thwarted by net export effect

Essential Graphs

Include correctly labeled graphs, if useful or required, in explaining answers. A correctly labeled diagram must have all axis and curves clearly labeled and must show directional changes.

Verbal Clues:

  • Using a correctly labeled graph, show
  • Explain the mechanism…
  • Identify the area of…
  • Show the impact…
  • Show price and output..
/
  • Directional indicators…
  • Two separate graphs
  • “new” correctly labeled graph
  • Side-by-side
  • Designate, Illustrate, Demonstrate, Depict

Know alternative terms:

  • Perfectly competitive, pure competition
  • Expenditures, revenues
  • Output, quantity
/
  • Price, $
  • Industry, Market
  • Factor, resource

Distinguish between:

  • Price and Price level
  • Total revenue and total cost
  • Economic profit and normal profit
  • AS and S
/
  • AD and D
  • Consumer surplus and surplus
  • Firm, Industry, market, economy

Other hints:

  • Identify the market
  • Before the change, the change, after the change
  • Deal with primary effects only unless otherwise instructed

AP Macroeconomics Concepts on Free Response Questions

Year and Question Guide

The following grid identifies AP macroeconomics concepts as listed in the Course Description Booklet (Acorn) and where the concept has appeared as a part of the free response section of the exams from 2001-2008. Most of the questions can be found at the website. Note that multiple concepts may be tested in a single question. If the questions are used as a part of a unit, it may be necessary to edit/alter the question to fit the material being discussed.

2008 / 2007 / 2006 / 2005 / 2004 / 2003 / 2002 / 2001
BASIC CONCEPTS
CIRCULAR FLOW
PRODUCTION POSSIBILITIES / #3 / #1
COMPARATIVE ADVANTAGE / #3 / #3
SUPPLY/DEMAND
MEAS. OF ECONOMIC PERFORMANCE
GDP / #3
INFLATION / #1 / #2 / #3 / #2
UNEMPLOYMENT / #1 / #1 / #1, #3 / #3
BUSINESS CYCLES
NATIONAL INCOME AND
PRICE DETERMINATION
AGGREGATE SUPPLY/DEMAND / #1 / #1 / #1, #3 / #1, #3 / #1, #2 / #1 / #1 / #1
COMPONENTS OF AD/AS / #1 / #1 / #1, #3 / #1, #3 / #1 / #1 / #1,#2 / #1
FISCAL POLICY / #1 / #3 / #1,#2 / #1 / #1
MONEY AND BANKING / #2 / #1, #3 / #3
MONETARY POLICY / #2 / #1 / #1, #3 / #1,#2 / #1
INTEREST RATES / #1 / #1, #2 / #2 / #1, #2 / #1 / #1,#2 / #1 / #1
ECONOMIC GROWTH / #2
PRODUCTION POSSIBILITIES / #2 / #1
INTERNATIONAL
FINANCE
SUPPLY/DEMAND / #2 / #1 / #1 / #1, #2 / #2 / #3 / #2
VALUE OF CURRENCY / #2 / #1 / #1 / #2 / #2 / #1,#2 / #3 / #2
2008 / 2007 / 2006 / 2005 / 2004 / 2003 / 2002 / 2001