Everything below prints as one AP AP Macroeconomics practice paper set: papers A & B with their answer keys, plus the full-length study package exam. Use the Download PDF / Print button (or Cmd/Ctrl+P) to save it.
Paper A
AP Macroeconomics — Practice Paper A
Original unofficial practice questions · paper A · answer key on the last page
Total time: see section headers · No guessing penalty
| Section | Questions | Format |
|---|---|---|
| Section I: Multiple Choice | ||
| Section II: Free Response |
Section I — Multiple Choice
GDP measures
A. total output within a countryB. national happinessC. exports onlyD. government spending onlyInflation is a sustained
A. rise in the general price levelB. fall in pricesC. increase in unemploymentD. rise in GDPThe unemployment rate includes those who are
A. actively looking and joblessB. retiredC. in school onlyD. discouraged onlyThe Federal Reserve conducts
A. monetary policyB. fiscal policyC. tariff policyD. industrial policyExpansionary fiscal policy uses
A. higher spending or tax cutsB. tax hikesC. lower spendingD. higher interest ratesThe multiplier effect arises because spending
A. generates re-spending roundsB. is saved entirelyC. leaks moneyD. raises taxesStructural unemployment is caused by
A. mismatches of skills and jobsB. weatherC. short recessionsD. interest ratesStagflation pairs
A. stagnation with inflationB. deflation with boomC. recession with deflationD. growth with surplusThe exchange rate is the price of
A. one currency in anotherB. a goodC. laborD. a bondPhillips curve trade-off links
A. inflation and unemploymentB. GDP and exportsC. taxes and spendingD. interest and pricesSection II — Free Response
Explain how an increase in government spending affects aggregate demand, output, and employment in the short run, using the multiplier.
5 points · rubric: AD shift 2 pts, multiplier 2 pts, outcomes 1 pt.
Compare contractionary monetary and fiscal policy and identify the tool each uses.
5 points · rubric: Monetary tool 2 pts, fiscal tool 2 pts, comparison 1 pt.
Answer Key
1. total output within a country — Domestic production.
2. rise in the general price level — Price-level trend.
3. actively looking and jobless — Labor-force definition.
4. monetary policy — Central bank role.
5. higher spending or tax cuts — Stimulus tools.
6. generates re-spending rounds — Circular flow.
7. mismatches of skills and jobs — Long-run mismatch.
8. stagnation with inflation — 1970s phenomenon.
9. one currency in another — Currency price.
10. inflation and unemployment — Short-run trade-off.
Free response — rubric notes
1. AD shift 2 pts, multiplier 2 pts, outcomes 1 pt. · model: Spending shifts AD right; the multiplier amplifies through re-spending; output and employment rise (short run).
2. Monetary tool 2 pts, fiscal tool 2 pts, comparison 1 pt. · model: Monetary: higher interest rates / reserve tightening by the central bank; fiscal: spending cuts or tax hikes by government.
Paper B
AP Macroeconomics — Practice Paper B
Original unofficial practice questions · paper B · answer key on the last page
Total time: see section headers · No guessing penalty
| Section | Questions | Format |
|---|---|---|
| Section I: Multiple Choice | ||
| Section II: Free Response |
Section I — Multiple Choice
GDP measures
A. government spending onlyB. national happinessC. total output within a countryD. exports onlyInflation is a sustained
A. fall in pricesB. increase in unemploymentC. rise in GDPD. rise in the general price levelThe unemployment rate includes those who are
A. retiredB. actively looking and joblessC. discouraged onlyD. in school onlyThe Federal Reserve conducts
A. industrial policyB. tariff policyC. monetary policyD. fiscal policyExpansionary fiscal policy uses
A. lower spendingB. higher spending or tax cutsC. tax hikesD. higher interest ratesThe multiplier effect arises because spending
A. leaks moneyB. raises taxesC. generates re-spending roundsD. is saved entirelyStructural unemployment is caused by
A. weatherB. interest ratesC. short recessionsD. mismatches of skills and jobsStagflation pairs
A. growth with surplusB. stagnation with inflationC. recession with deflationD. deflation with boomThe exchange rate is the price of
A. a goodB. laborC. one currency in anotherD. a bondPhillips curve trade-off links
A. GDP and exportsB. interest and pricesC. taxes and spendingD. inflation and unemploymentSection II — Free Response
Explain how an increase in government spending affects aggregate demand, output, and employment in the short run, using the multiplier.
5 points · rubric: AD shift 2 pts, multiplier 2 pts, outcomes 1 pt.
Compare contractionary monetary and fiscal policy and identify the tool each uses.
5 points · rubric: Monetary tool 2 pts, fiscal tool 2 pts, comparison 1 pt.
Answer Key
1. total output within a country — Domestic production.
2. rise in the general price level — Price-level trend.
3. actively looking and jobless — Labor-force definition.
4. monetary policy — Central bank role.
5. higher spending or tax cuts — Stimulus tools.
6. generates re-spending rounds — Circular flow.
7. mismatches of skills and jobs — Long-run mismatch.
8. stagnation with inflation — 1970s phenomenon.
9. one currency in another — Currency price.
10. inflation and unemployment — Short-run trade-off.
Free response — rubric notes
1. AD shift 2 pts, multiplier 2 pts, outcomes 1 pt. · model: Spending shifts AD right; the multiplier amplifies through re-spending; output and employment rise (short run).
2. Monetary tool 2 pts, fiscal tool 2 pts, comparison 1 pt. · model: Monetary: higher interest rates / reserve tightening by the central bank; fiscal: spending cuts or tax hikes by government.
Full-length study package exam
AP Macroeconomics – Full Practice Exam
Section I: Multiple-Choice (70 minutes, 60 questions)
1. Scarcity exists because: (A) People are greedy (B) Resources are limited (C) Governments are inefficient (D) Technology is insufficient
2. A country has a comparative advantage in producing a good if it: (A) Can produce more of it than any other country (B) Has a lower opportunity cost of producing it (C) Uses fewer resources to produce it (D) Has a larger labor force
3. Which of the following is included in GDP? (A) A used car sale (B) A student's textbook purchase (C) Social Security benefits (D) The purchase of 100 shares of Apple stock
4. If the CPI increases from 180 to 198, the rate of inflation is: (A) 10% (B) 18% (C) 9% (D) 20%
5. A person who is working part-time but wants a full-time job is counted as: (A) Employed (B) Unemployed (C) Not in the labor force (D) Under the natural rate
6. The natural rate of unemployment consists of: (A) Cyclical unemployment only (B) Frictional and structural unemployment (C) Frictional unemployment only (D) Structural and cyclical unemployment
7. Which would shift AD to the left? (A) Decrease in taxes (B) Increase in government spending (C) Decrease in consumer confidence (D) Decrease in interest rates
8. An increase in the price of oil would: (A) Shift AD left (B) Shift SRAS left (C) Shift SRAS right (D) Shift LRAS left
9. In the long run, the economy will always return to: (A) The current price level (B) Full employment output (C) Zero unemployment (D) The current level of AD
10. The short-run Phillips curve shows a tradeoff between: (A) Real GDP and inflation (B) Unemployment and inflation (C) Interest rates and unemployment (D) Government spending and inflation
11. If the required reserve ratio is 25%, the money multiplier is: (A) 4 (B) 25 (C) 0.25 (D) 0.04
12. The Fed buys $2 million in bonds. If the RRR is 10%, the maximum change in the money supply is: (A) +$2M (B) +$20M (C) -$2M (D) -$20M
13. In the money market, an increase in income would: (A) Shift money demand right (B) Shift money demand left (C) Shift money supply right (D) Have no effect
14. Bond prices and interest rates are: (A) Positively related (B) Negatively related (C) Unrelated (D) Related only in the short run
15. Crowding out occurs in the: (A) Money market (B) Loanable funds market (C) Product market (D) Factor market
16. If MPC = 0.8, the tax multiplier is: (A) -4 (B) -0.8 (C) 5 (D) -5
17. An increase in government spending with no change in taxes will: (A) Not change AD (B) Shift AD right by more than the spending increase (C) Shift AD right by exactly the spending increase (D) Shift AD left
18. Contractionary monetary policy involves the Fed: (A) Buying bonds (B) Lowering the discount rate (C) Selling bonds (D) Lowering the RRR
19. A current account deficit must be financed by: (A) A current account surplus (B) A capital/financial account surplus (C) An increase in the money supply (D) Higher taxes
20. If US interest rates rise relative to European rates, the dollar will: (A) Depreciate (B) Appreciate (C) Not change (D) Become fixed
21-60. [Additional MCQs follow the same format, covering all six units with graph-interpretation questions, calculation questions, and application questions distributed across: Unit 1 (6 questions), Unit 2 (10 questions), Unit 3 (12 questions), Unit 4 (12 questions), Unit 5 (12 questions), Unit 6 (8 questions)]
Section II: Free-Response Questions (60 minutes)
FRQ 1 (Long FRQ, 10 points)
The economy of Norland is currently in long-run equilibrium. A severe hurricane destroys a significant portion of the country's capital stock and infrastructure.
a. Draw a correctly labeled AD/AS graph for Norland showing the initial equilibrium (E1) and the short-run effect of the hurricane. Label the new short-run equilibrium price level PL2 and output Y2.
b. Based on your graph, has the unemployment rate increased or decreased? Explain.
c. Draw a correctly labeled short-run Phillips curve for Norland. Show the initial position (point A) and the new short-run position (point B) caused by the hurricane.
d. If the government of Norland increases spending to stimulate the economy, explain the potential crowding out effect that could partially offset the fiscal stimulus. Identify the market in which this effect occurs.
e. Assuming no crowding out, if the government spending multiplier is 4 and the government increases spending by $50 billion, calculate the total change in real GDP.
FRQ 2 (Short FRQ, 5 points)
The central bank of the country of Aldor buys $500 million in government bonds from commercial banks. The required reserve ratio is 20%.
a. Calculate the maximum change in the money supply from this open market purchase.
b. Draw a correctly labeled money market graph showing the effect of this action on the equilibrium nominal interest rate.
c. Explain how the change in the interest rate would affect aggregate demand in Aldor.
FRQ 3 (Short FRQ, 5 points)
The United States and Japan are major trading partners. The Federal Reserve raises the federal funds rate significantly.
a. Draw a correctly labeled graph of the foreign exchange market for the US dollar. Show the effect of the higher US interest rates on the value of the dollar.
b. Based on your answer to part (a), explain how US net exports would change.
c. Would this change in net exports reinforce or partially offset the Fed's contractionary policy? Explain.
Answer Key & Rubric
AP Macroeconomics – Full Practice Exam Answer Key
Section I: MCQ Answers
- B – Scarcity exists because resources are limited relative to wants.
- B – Comparative advantage = lower opportunity cost.
- B – Textbook purchase counts as consumption. Used cars, transfers, and financial transactions are excluded.
- A – (198-180)/180 × 100 = 10%.
- A – Part-time workers are counted as employed.
- B – NRU = frictional + structural.
- C – Lower confidence decreases consumption, shifting AD left.
- B – Higher input prices shift SRAS left.
- B – The economy self-corrects to full employment (LRAS).
- B – The SRPC shows the unemployment-inflation tradeoff.
- A – 1/0.25 = 4.
- B – $2M × (1/0.10) = $20M increase.
- A – Higher income increases transaction demand for money.
- B – Bond prices and interest rates are inversely related.
- B – Crowding out occurs in the loanable funds market.
- A – Tax multiplier = -0.8/0.2 = -4.
- B – The multiplier means AD shifts right by more than the initial spending increase.
- C – Selling bonds is contractionary (reduces money supply).
- B – A current account deficit is offset by a capital/financial account surplus.
- B – Higher US rates attract foreign capital, appreciating the dollar.
Section II: FRQ Scoring Guidelines
FRQ 1 (10 points)
Part (a) – 2 points:
- 1 point: Correct AD/AS graph with PL on vertical axis, Y on horizontal, AD, SRAS, LRAS labeled
- 1 point: LRAS and SRAS shift left (or only SRAS shifts left if capital is partially destroyed). New equilibrium shows higher PL2 and lower Y2.
Part (b) – 1 point:
- 1 point: The unemployment rate has increased because output decreased (Y2 < Y1 = Y*), meaning fewer workers are needed. Cyclical unemployment is now positive.
Part (c) – 2 points:
- 1 point: Correct SRPC graph (downward sloping, inflation on vertical, unemployment on horizontal)
- 1 point: Movement from point A to point B showing higher unemployment AND higher inflation
Part (d) – 3 points:
- 1 point: Explains crowding out: increased government spending requires borrowing, which increases demand for loanable funds
- 1 point: Identifies the loanable funds market
- 1 point: Explains that the increased demand raises real interest rates, which reduces private investment, partially offsetting the AD increase
Part (e) – 2 points:
- 1 point: Shows calculation: $50B × 4 = $200B
- 1 point: States the total change in real GDP is an increase of $200 billion
FRQ 2 (5 points)
Part (a) – 1 point:
- Maximum change = $500M × (1/0.20) = $500M × 5 = $2.5 billion increase
Part (b) – 2 points:
- 1 point: Correct money market graph (nominal interest rate vertical, quantity of money horizontal)
- 1 point: Money supply shifts right, interest rate falls
Part (c) – 2 points:
- 1 point: Lower interest rates increase investment spending (I) and interest-sensitive consumption
- 1 point: This increases aggregate demand (AD shifts right)
FRQ 3 (5 points)
Part (a) – 2 points:
- 1 point: Correct forex market graph (exchange rate vertical, quantity of dollars horizontal)
- 1 point: Demand for dollars shifts right (or supply shifts left, or both), showing dollar appreciation
Part (b) – 1 point:
- The stronger dollar makes US exports more expensive and US imports cheaper. Exports decrease, imports increase, so net exports decrease.
Part (c) – 2 points:
- 1 point: The decrease in net exports reinforces the contractionary policy.
- 1 point: Explanation: Both the higher interest rate (reducing I and C) and the decrease in NX shift AD to the left, reinforcing the Fed's goal of reducing inflation.