Past free-response questions

2026

• Question 1 · Long · 10 points Inflationary gap and open-market operations in Micanapy Graph an inflationary gap and explain self-adjustment, pick an open-market operation for a limited reserves system, graph the money market, and follow the interest rate change to capital flows, bonds, investment and unemployment. Unit 4, Unit 3, Unit 6
• Question 2 · Short · 5 points Foxhound labor data and Phillips curves Use a labor market table to find employment and the unemployment rate, plot the economy on Phillips curves, and decide how retirements of employed people change the unemployment rate. Unit 2, Unit 5
• Question 3 · Short · 5 points Closing a recessionary gap in Lizland Pick a monetary policy action and compute the government spending change needed to close a recessionary gap, then link the price level change to the value of Lizland's currency on a foreign exchange graph. Unit 3, Unit 4, Unit 6

2025, Set 1

• Question 1 · Long · 10 points Construction boom and import tariffs in Vortania Show new construction on a Phillips curve graph, then graph how tariffs change the currency market, follow the currency change to net exports, the capital and financial account and jobs, and say how the central bank could reverse it. Unit 6, Unit 5
• Question 2 · Short · 5 points Limited versus ample reserves monetary policy Choose the right policy tool for a limited reserves system and for an ample reserves system, graph the reserve market, and explain what happens to short-run aggregate supply if nobody acts. Unit 4, Unit 3
• Question 3 · Short · 5 points Real GDP and the output gap in Middleland Compare real and nominal GDP in the base year, compute real GDP for the next year from a price table, graph the gap against potential output, and size the spending change needed with the multiplier. Unit 2, Unit 3

2025, Set 2

• Question 1 · Long · 10 points Phillips curve, deficits and capital flows in Barrikos Find the actual unemployment rate from its parts, plot the Phillips curves, choose a fiscal policy and judge its effect on the budget, then trace it through loanable funds to capital flows and the currency. Unit 5, Unit 6
• Question 2 · Short · 5 points Cooling an overheated economy in Jenland Choose a central bank action for an economy above full employment, graph the reserve market, and say what happens to old bond prices and the price level. Unit 4
• Question 3 · Short · 5 points Thai income growth and Nepal's economy Graph Nepal at full employment, show the effect of a trading partner getting richer, compute the spending change needed to close the gap, and explain how automatic stabilizers soften the swing. Unit 3

2024, Set 1

• Question 1 · Long · 10 points Recession, self-adjustment and monetary policy in Alpha Find the natural unemployment rate from the given rates, graph the recessionary gap and its long-run fix, then pick an ample reserves policy action, graph the reserve market, and trace effects on bond prices and prices. Unit 3, Unit 4, Unit 2
• Question 2 · Short · 5 points Real GDP, inflation and living standards in Louland Use nominal GDP and the GDP deflator to get real GDP, connect the change to money demand and interest rates, compare living standards per person, and judge what happened to real wages. Unit 2, Unit 4
• Question 3 · Short · 5 points Malaysian fiscal policy and the ringgit Pick a fiscal policy to fight a recession, explain what it does to the real interest rate, show the currency change on a foreign exchange graph, and decide how imports respond. Unit 3, Unit 5, Unit 6

2024, Set 2

• Question 1 · Long · 10 points Falling consumer spending and policy in Moneyland Compute the MPC from the given spending and income data, show the drop in spending on an AD and AS graph, explain long-run adjustment, then choose a monetary policy and show it in the reserve market with its short-run effects. Unit 3, Unit 4
• Question 2 · Short · 5 points Maltrose GDP deflator and winners from inflation Use a two-good price and quantity table to find nominal GDP, the deflator and inflation, then decide whether fixed-income earners and fixed-rate borrowers come out ahead when inflation beats expectations. Unit 2
• Question 3 · Short · 5 points Jamaican fiscal policy, net exports and its currency Choose a fiscal policy to reach full employment, decide how the higher output changes net exports, graph the effect on the Jamaican dollar, and explain the result for the capital and financial account. Unit 3, Unit 6

2023, Set 1

• Question 1 · Long · 10 points Closing a recessionary gap in Vanderlandia Graph an economy below full employment, explain how it self-corrects, use the spending multiplier to size a government spending change, and trace that change through the loanable funds market to bond prices and long-run growth. Unit 3, Unit 5
• Question 2 · Short · 5 points Phillips curve and monetary policy in Noralandia Place the economy on a Phillips curve graph when inflation is above what people expected, pick a central bank action to bring it down, then follow the interest rate change to capital flows and the currency's value. Unit 5, Unit 4, Unit 6
• Question 3 · Short · 5 points Unemployment math and the PPC in Zeta Work out how many people are unemployed from population and rate data, decide what kind of output gap exists, place the economy on a production possibilities curve, and say how discouraged workers change the labor statistics. Unit 2, Unit 1

2023, Set 2

• Question 1 · Long · 10 points Phillips curve and fiscal policy in Northland Place the economy on both Phillips curves from the rates it gives you, compare the tax and spending multipliers, show what extra government spending does, and explain how the economy adjusts on its own in the long run. Unit 5, Unit 3
• Question 2 · Short · 5 points US income growth and trade with South Africa Decide how rising US income changes US net exports and the capital and financial account, link that to jobs in South Africa, and graph what happens to the value of the rand. Unit 6, Unit 3
• Question 3 · Short · 5 points Consumer confidence shock and a central bank response Graph an economy at full employment, show a rise in consumer confidence, then choose a monetary policy action that holds prices steady and say what it does to output. Unit 3, Unit 4, Unit 5

2022, Set 1

This exam had three free-response questions in a 60 minute section (a 10 minute reading period and 50 minutes of writing), worth 10, 5 and 5 points, with students told to spend about half the time on Question 1 and split the rest between Questions 2 and 3. College Board's scoring guidelines label Question 1 Long and Questions 2 and 3 Short. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · Long · 10 points Recession gap, multiplier and loanable funds Graph an economy below full employment, name a fiscal fix, use the spending multiplier to find the investment change behind a GDP increase, and show it on the graph. Then judge unemployment against the natural rate and trace higher saving through loanable funds to short-run output and long-run growth. Unit 3, Unit 4
• Question 2 · Short · 5 points Bond sale, money multiplier and MV=PY Find the largest possible change in the money supply after the central bank sells bonds under a 20 percent reserve rule, graph the money market result, and use the quantity equation to say what happens to nominal GDP and the price level. Unit 4, Unit 5
• Question 3 · Short · 5 points Euro and yen exchange after Japanese rates rise Convert a coat's euro price into yen, decide which way financial capital moves when Japanese real rates rise, graph the yen market, and explain what the yen's change does to Italian exports to Japan. Unit 6

2022, Set 2

This exam had three free-response questions in a 60 minute section (a 10 minute reading period and 50 minutes of writing), worth 10, 5 and 5 points, with students told to spend about half the time on Question 1 and split the rest between Questions 2 and 3. College Board's scoring guidelines label Question 1 Long and Questions 2 and 3 Short. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · Long · 10 points Inflationary gap, spending boost and the dollar Graph an economy above potential, add a government spending increase, and use the multiplier for the largest change in output. Then show the money market and bond price effects, how higher US inflation moves demand for dollars, and which currencies the Fed would trade to hold the dollar steady. Unit 3, Unit 4, Unit 6
• Question 2 · Short · 5 points Real GDP per capita and education spending Use nominal GDP, a deflator and population to compute real GDP and real GDP per person, judge whether living standards changed, and explain and graph how education spending affects growth on a PPC. Unit 2, Unit 5, Unit 1
• Question 3 · Short · 5 points Cutting the national debt and interest rates Pick a fiscal action that reduces the national debt, show its effect in the loanable funds market, and explain what the interest rate change does to short-run aggregate demand and to potential output. Unit 5, Unit 4

2021, Set 1

This exam had three free-response questions in a 60 minute section (a 10 minute reading period and 50 minutes of writing), worth 10, 5 and 5 points, with students told to spend about half the time on Question 1 and split the rest between Questions 2 and 3. College Board's scoring guidelines label Question 1 Long and Questions 2 and 3 Short. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · Long · 10 points Sweden, falling exports and the krona Use the balance of payments to classify Sweden's financial account, graph what lower UK imports from Sweden do to output and prices, and say whether unemployment or inflation worries you more. Then pick open market operations to close the gap and to reverse the krona's fall, and explain how the second works. Unit 6, Unit 3
• Question 2 · Short · 5 points Expansionary fiscal policy and crowding out Choose a fiscal action to fix a recession, show its effect on the real interest rate in the loanable funds market, and explain what the rate change does to net exports and to the capital stock. Unit 5, Unit 4, Unit 3, Unit 6
• Question 3 · Short · 5 points Flowerland unemployment and a price index Find cyclical unemployment from given rates, explain how stronger foreign demand for an export changes aggregate demand and unemployment, build a price index from a two-good basket, and compare income growth with inflation to judge living standards. Unit 2, Unit 3

2019, Set 1

This exam had three free-response questions in a 60 minute section (a 10 minute reading period and 50 minutes of writing), worth 10, 5 and 5 points, with students told to spend about half the time on Question 1 and split the rest between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Canada recession, multipliers and the Canadian dollar Graph a recessionary gap and explain and show the long-run self-correction. Then compute the smallest spending increase and the smallest tax change that would close the gap, show a central bank fix in the money market, and graph what lower rates do to the Canadian dollar. Unit 3, Unit 4, Unit 6
• Question 2 · 5 points Phillips curve with unemployment above natural Sketch the Phillips curves for both the short and long run using the given numbers, compare actual with expected inflation, decide whether lenders gain or lose, and say what happens to the natural rate in the long run. Unit 5, Unit 4, Unit 2
• Question 3 · 5 points More retirement saving and the currency Show how more household saving changes the real interest rate in loanable funds, explain the effect on buying foreign assets, and work out the currency's value and how the central bank would respond in the foreign exchange market. Unit 4, Unit 6

2019, Set 2

This exam had three free-response questions in a 60 minute section (a 10 minute reading period and 50 minutes of writing), worth 10, 5 and 5 points, with students told to spend about half the time on Question 1 and split the rest between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Artland above full employment, two ways back Graph an inflationary gap, then show and explain the long-run adjustment with no policy. Compare it with a contractionary fiscal fix, including effects on unemployment, the natural rate and the price level, and trace the fiscal action through loanable funds to long-run aggregate supply. Unit 3, Unit 4, Unit 5
• Question 2 · 5 points US income growth, EU rates and the euro Explain how higher US real income affects the current account, graph the euro market result, and work out what higher EU interest rates do to demand for and the value of the dollar. Unit 6
• Question 3 · 5 points Sweden and Norway PPC and trade terms Graph Sweden's PPC from a table and mark efficient, inefficient and unattainable points, judge how shifting output away from capital goods affects future growth, find the comparative advantage in capital goods, and pick trade terms that help both countries. Unit 1, Unit 5

2018

This exam had three free-response questions in a 60 minute section (a 10 minute reading period and 50 minutes of writing), worth 10, 5 and 5 points, with students told to spend about half the time on Question 1 and split the rest between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points US recession worsened by a euro zone slump Graph a US recession, explain and show how a euro zone recession changes US exports, output and unemployment, then work out the euro's value and graph the dollar market. Finally predict the effects of combined expansionary fiscal and monetary policy on demand, prices and interest rates. Unit 3, Unit 6, Unit 5
• Question 2 · 5 points Lower tax on interest earnings and saving Say how a cut in the tax on interest income changes private saving, show the effect in loanable funds, and explain what the rate change does to aggregate demand now and to potential GDP later. Unit 4, Unit 5
• Question 3 · 5 points Comparative advantage and labor market rates Use labor hours to work out which nation holds the comparative advantage for consumer goods, compute the unemployment rate and labor force participation rate from a table, and place a point on a PPC that matches the unemployment. Unit 1, Unit 2

2017

This exam had three free-response questions in a 60 minute section (a 10 minute reading period and 50 minutes of writing), worth 9, 6 and 5 points, with students told to spend about half the time on Question 1 and split the rest between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 9 points Phillips curve, fiscal stimulus and currency supply Plot the Phillips curves for the short and long run from given rates, predict long-run changes with no policy, pick and graph a fiscal action to cut unemployment, and explain how higher real GDP changes the supply of the currency and its value. Unit 5, Unit 3, Unit 6
• Question 2 · 6 points Credit cards, money demand and velocity Show how holding less cash changes the money market and interest rate, then predict bond prices, the price level, real income and velocity, and pick the open market operation that reverses the rate change. Unit 4, Unit 5
• Question 3 · 5 points Higher national saving and the PPC Mark a full-employment point on a PPC, show more national saving in the loanable funds market, mark a new point that fits more capital goods, and explain what this does to long-run aggregate supply. Unit 1, Unit 4, Unit 5

2016

This exam had three free-response questions in 60 minutes (a 10 minute reading period and 50 minutes of writing), with a suggestion to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Phillips curves, Fed bond buying and the yen Starting from unemployment above its natural rate, draw both Phillips curves, predict how the short-run curve adjusts with no policy, then trace an expansionary open market purchase through interest rates and real GDP to the demand for yen, finishing with a graph of the yen market. Unit 5, Unit 4, Unit 6
• Question 2 · 6 points Bank balance sheet and money creation Use a bank's balance sheet and a 10 percent reserve requirement to find how much it can lend before and after a $100 cash deposit, then work out the most that loans, deposits and the money supply can grow across the banking system and say why the real change could fall short. Unit 4
• Question 3 · 5 points Donuts and cupcakes: advantage and trade From two people's daily output of donuts and cupcakes, name who holds the absolute and comparative advantage in donuts, judge whether a given trade ratio helps each person, and draw one producer's PPC before and after a cupcake-only technology gain. Unit 1

2015

This exam had three free-response questions in a 10 minute planning period plus 50 minutes of writing, with a suggestion to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Closing a recessionary gap with monetary or fiscal policy Graph an economy below full employment, pick the federal funds rate move that closes the gap and show it in the money market, compute the spending change needed with an MPC of 0.8 and compare it with the tax change needed, then judge how an income tax cut affects AD and LRAS. Unit 3, Unit 4
• Question 2 · 5 points Furnaces and solar panels across two countries Using two countries' production of furnaces and solar panels, identify absolute advantage, compute an opportunity cost, explain which nation holds the comparative advantage for furnaces, and decide whether one country gains by importing at given terms of trade. Unit 1
• Question 3 · 6 points Japan's deficit, interest rates and the euro Explain how a bigger Japanese budget deficit moves Japan's real interest rate and private investment, graph the resulting shift in the euro market and how many yen a euro now costs, and say what the European Central Bank would do to reverse it. Unit 5, Unit 6

2014

This exam had three free-response questions in a 10 minute planning period plus 50 minutes of writing, with a suggestion to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 11 points Borrowed government spending in a recession Graph an economy below full employment, judge how debt-financed spending affects cyclical and natural unemployment, compute the largest possible GDP change with an MPC of 0.75, show the loanable funds effect and its link to long-run growth, and decide what happens if the spending is tax-financed instead. Unit 3, Unit 5
• Question 2 · 6 points Open market operations and the discount rate Pick the open market operation that lowers the federal funds rate and its effect on bond prices, show it on a money market graph, decide how a bond purchase from banks changes required reserves, and define the discount rate. Unit 4
• Question 3 · 5 points Lower U.S. inflation, trade and the dollar When U.S. inflation falls relative to South Korea's, predict the change in U.S. exports, the current account and short-run real GDP, then graph the market for dollars to show the effect on the won price of the dollar. Unit 6

2013

This exam had three free-response questions in a 10 minute planning period plus 50 minutes of writing, with a suggestion to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Higher saving, interest rates and the euro Graph an economy at full employment, show how more personal saving changes the real interest rate in loanable funds and what that means for interest-sensitive spending and growth, graph the euro market after euro zone rates rise, and judge the U.S. current account. Unit 4, Unit 5, Unit 6
• Question 2 · 5 points Fischerland's PPC and a recession Read a PPC for consumer and capital goods to judge which goods show increasing opportunity cost, redraw it with points for full employment and for a recession, name a fiscal policy for the recession, and explain how SRAS adjusts in the long run without policy. Unit 1, Unit 3
• Question 3 · 6 points Expected inflation and the Phillips curve Draw a short-run Phillips curve and show what higher expected inflation does to it and to the long-run curve, decide how nominal and real rates on new loans respond, and compute a real interest rate from given figures. Unit 5, Unit 4

2012

This exam had three free-response questions in a 10 minute planning period plus 50 minutes of writing, with a suggestion to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 12 points Rankinland's recession and expansionary monetary policy Draw a PPC with a point showing recession, name the open market operation for expansionary policy, show it in the money market, trace the real interest rate and real GDP effects, then explain what the GDP change does to the current account deficit and the currency's value. Unit 1, Unit 4, Unit 6
• Question 2 · 5 points A cash withdrawal from Mi Tierra Bank From a bank's balance sheet, find the reserve requirement, then work out how a $5,000 cash withdrawal changes reserves, M1 and excess reserves, and say how the bank could meet its requirement after a larger withdrawal. Unit 4
• Question 3 · 6 points Export boom in Andersonland Graph a long-run equilibrium, show how rising exports shift it in the short run, explain what happens to real wages, and say which AD component changes when exporters buy new capital and how that affects LRAS. Unit 3, Unit 5

2011

This exam had three free-response questions with 50 minutes of writing time after a 10 minute planning period, with a suggestion to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 11 points Recession, tax increase and Fed response Show a recession on Phillips curve and AD-AS graphs, add the effect of raising taxes to balance the budget, choose and graph an expansionary open market policy and its price level effect, then explain the long-run adjustment of SRAS and the natural rate with no policy. Unit 5, Unit 3, Unit 4
• Question 2 · 6 points Foreign investment and exchange rates Graph how more European investment in Japan changes Japan's real interest rate and explain the employment effect, then graph the market for Canadian dollars after Canada's real rate rises relative to Mexico's and explain the effect on Canadian exports. Unit 4, Unit 6
• Question 3 · 6 points Sewell Bank and a Fed bond purchase Compute a bank's required reserve ratio from its balance sheet, find the immediate changes after the Fed buys bonds from it, calculate the largest possible money supply change, explain the bond price effect, and say how a cash deposit affects M1 right away. Unit 4

2011, Form B

This Form B exam had three free-response questions with 50 minutes of writing time after a 10 minute planning period, with a suggestion to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Falling consumer confidence in Meekland Graph a long-run equilibrium and the short-run effect of lower consumer confidence, show it on Phillips curves, explain the change in transfer payments and its loanable funds effect, and explain how SRAS adjusts in the long run without policy. Unit 3, Unit 5
• Question 2 · 5 points Euro and Singapore dollar exchange rate Explain how a change in the euro to Singapore dollar rate affects Singapore's aggregate demand and employment, then choose a foreign exchange action and a domestic open market operation that would undo the change. Unit 6, Unit 4
• Question 3 · 5 points Nominal and real GDP, inflation and loans Compute nominal and real GDP from a price and quantity table, find an inflation rate from two index values, decide how real wages move when wage growth trails inflation, and explain who gains from unexpected inflation on a fixed-rate loan. Unit 2, Unit 4

2010

This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Defense spending in long-run equilibrium Starting from long-run equilibrium, show on an AD and AS graph how added defense spending moves the economy, explain the unemployment and long-run SRAS effects, and use a loanable funds graph to trace the borrowing through to investment and growth. Unit 3, Unit 5, Unit 4
• Question 2 · 6 points Cheaper credit cards and the money market Show on a money market graph what lower money demand does to the nominal interest rate, then follow that change to bond prices and the price level, and pick an open market operation that would hold the rate steady. Unit 4, Unit 3
• Question 3 · 6 points US exports to Argentina and the dollar Explain how a US sale to an Argentine firm affects Argentina's AD and the US current account, graph how less US investment in Argentina changes the dollar market, and reason about the peso given different inflation rates. Unit 6

2010, Form B

This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Military spending during a recession Graph an economy below full employment, show how more military spending shifts AD and moves the economy along the short-run Phillips curve, explain the effect on the real interest rate, and show the change on a production possibilities curve. Unit 3, Unit 5, Unit 1
• Question 2 · 7 points Central bank bond sale in Sewell Trace a central bank bond sale through bank lending, a money market graph, the price level and the real interest rate, then explain what happens to the value of the country's currency. Unit 4, Unit 6
• Question 3 · 4 points Four shocks to output and prices For an oil price rise, a productivity gain, more consumer spending and a currency depreciation, say how real GDP and the price level change in the short run and explain why. Unit 3, Unit 6

2009

This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 11 points Fed lowers its inflation target Sketch the Phillips curves for both the short and long run at the starting point, compute the real interest rate, choose the open market operation for lower inflation, graph its money market effect, and explain the effects on AD, the short-run Phillips curve and the natural rate. Unit 5, Unit 4
• Question 2 · 6 points Capital flight from Tara Explain what investors pulling funds out of Tara does to its currency, show the loanable funds result for the real interest rate, and explain the consequence for growth. Unit 6, Unit 4, Unit 5
• Question 3 · 6 points Deposits, reserves and the money supply With a 20 percent reserve requirement, compute what a cash deposit lets banks lend and how far deposits and the money supply can grow, compute the effect of a Fed bond purchase, and explain what happens to real wages. Unit 4, Unit 3

2009, Form B

This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 9 points Tax cut or wait in Southland Graph an economy with high unemployment, then compare an adviser who wants a tax cut with one who wants no action, showing each path on AD and AS and short-run Phillips curve graphs. Unit 3, Unit 5
• Question 2 · 7 points Bond sale with a 10 percent reserve ratio Compute the change in reserves and the biggest amount the money supply could change after a bond sale, show the money market effect, and explain what the price level change means for people on fixed incomes. Unit 4, Unit 2
• Question 3 · 6 points Higher real rates in India Use a foreign exchange graph to show how a rise in India's real interest rate shifts the supply and value of the Canadian dollar, then show the effect on Canada's real interest rate with a loanable funds graph. Unit 6, Unit 4

2007

This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 12 points Falling stock prices and the dollar Graph the money market after investors move into cash, show how a lower US price level changes the market for dollars, then follow the exchange rate change to net exports, AD, output, prices and unemployment. Unit 4, Unit 6, Unit 3
• Question 2 · 6 points Targeting the federal funds rate Define the federal funds rate, choose the open market operation that lowers it, compute the largest change in loans for a given reserve ratio, and explain the effects on nominal and real interest rates. Unit 4
• Question 3 · 8 points What counts in 2006 GDP Decide whether each of four transactions, such as a used book sale or cars built abroad by a US firm, belongs in US GDP for the year and explain why. Unit 2

2007, Form B

This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 12 points Australia's recovery and New Zealand Show on AD and AS and money market graphs how Australia's recovery affects New Zealand's output, money demand and interest rate, reason about New Zealand's real interest rate, and say how Australia's curves move in the long run without policy. Unit 3, Unit 4
• Question 2 · 7 points Investment tax credit and saving incentives Use two loanable funds graphs to show how a machinery tax credit and a lower tax on savings interest each change the real interest rate, then explain the long-run effect on the production possibilities curve. Unit 4, Unit 5, Unit 1
• Question 3 · 7 points Lower US real rate and the euro Explain how a drop in the US real interest rate changes capital flows with the European Union, show the effect on the euro with a foreign exchange graph, and explain what follows for EU net exports. Unit 6

2006

This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 11 points Oil price shock below full employment Draw an economy below full employment, show an oil price rise shifting SRAS, explain the unemployment effect, and show how lower US output changes the supply of dollars and the dollar's value against the yen. Unit 3, Unit 6, Unit 2
• Question 2 · 8 points Income, saving and interest rates Show on a money market graph how higher income changes the nominal rate, show on a loanable funds graph how more household saving changes the real rate, and compute nominal and real rates once inflation is expected. Unit 4
• Question 3 · 7 points Fiscal policy and unemployment measures Compare the unemployment rate after expansionary fiscal policy with the natural rate, explain how moving workers to part time affects the official count, and explain and graph how lower unemployment benefits shift the long-run Phillips curve. Unit 2, Unit 5, Unit 3

2006, Form B

This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 11 points Recession, self-correction, and a saving incentive Graph an economy below full employment with long-run aggregate supply, then explain how short-run aggregate supply and employment adjust with no policy. Show a saving tax incentive in the loanable funds market and explain its long-run effect on aggregate supply. Unit 3, Unit 4, Unit 5
• Question 2 · 6 points Bank deposits and money creation Explain why a cash deposit leaves the money supply unchanged at first, calculate new loans and the maximum money supply increase when banks hold excess reserves, and explain what happens to money supply and money demand when the central bank buys new government bonds. Unit 4
• Question 3 · 7 points Canadian dollar and won exchange rate Using a given foreign exchange graph, explain how higher Canadian inflation and lower Canadian real interest rates change demand for the Canadian dollar, then say how the dollar's value and Canada's exports to South Korea respond. Unit 6

2005

This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 13 points Japanese recession and a Fed response Graph a US economy at full employment, show and explain how a recession in a major export market changes output and prices, then pick an open market operation, graph its money market effect, and trace it through to aggregate demand. Define the real interest rate and say how the policy changes it. Unit 3, Unit 4
• Question 2 · 8 points Deficit spending in the loanable funds market Starting from a given loanable funds graph, explain how more government borrowing changes the real interest rate, then follow that rate change through to investment, long-run growth, and the demand for and value of the country's currency. Unit 5, Unit 4, Unit 6
• Question 3 · 6 points Plotting short-run and long-run Phillips curves Plot a short-run Phillips curve from two years of unemployment and inflation data, name a cause of a leftward aggregate supply shift and show its effect on the curve, draw the long-run Phillips curve at the natural rate, and state the long-run relationship. Unit 5

2005, Form B

This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 11 points Open market bond sale and its effects Graph how a central bank bond sale changes the money supply and interest rate, say whether that rate is real or nominal and when the two differ, then show the short-run effects on the AD-AS graph and the Phillips curve, and name a fiscal policy that would offset them. Unit 4, Unit 5
• Question 2 · 7 points Labor productivity and economic growth Name two sources of higher labor productivity, then use an AD-AS graph to show what rising productivity does over time to real output and the price level, and show it again on a two-good production possibilities curve. Unit 5, Unit 3, Unit 1
• Question 3 · 7 points Budget deficit, interest rates and the dollar Graph how a larger budget deficit changes the real interest rate in the loanable funds market and say what happens to business investment, then graph the foreign exchange market for the dollar and explain how the country's goods become more or less competitive. Unit 5, Unit 4, Unit 6

2004

This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 13 points Closing a recessionary gap or waiting Graph an economy below full employment, name an open market operation that would close the gap, show its money market effect and explain how it raises aggregate demand on the original graph, then explain how the economy would adjust on its own with flexible wages and prices. Unit 4, Unit 3
• Question 2 · 7 points Higher US saving and the dollar Explain how a rise in national saving changes the US real interest rate, then trace that change to the demand for and value of the dollar and to US imports and exports. Unit 4, Unit 6
• Question 3 · 7 points Fed bond purchase and money multiplier Find the money supply change from a Fed bond purchase under a 100 percent reserve ratio, calculate one bank's lending and the maximum money supply increase at a 10 percent ratio, and explain how excess reserves and cash holdings shrink that increase. Unit 4

2004, Form B

This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 12 points Oil price shock and two policy responses Show how a rise in oil prices affects output and the price level on an AD-AS graph and shifts the short-run Phillips curve, explain how a money supply increase would work through to aggregate demand, then graph the effect of a business tax cut that lowers production costs. Unit 3, Unit 5, Unit 4
• Question 2 · 8 points Capital inflow into Canada Explain how a large inflow of foreign funds affects the value of the Canadian dollar, Canadian net exports, Canada's real interest rate, and investment there. Unit 6, Unit 4
• Question 3 · 6 points Comparative advantage in cloth and food Use a table of output per worker to calculate opportunity costs, decide which country has the comparative advantage in each good, and explain whether that changes when one country's productivity triples in both goods. Unit 1

2003

This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 14 points Spending cuts and a Fed purchase in recession Graph an economy in deep recession, show and explain how a cut in government spending affects output, prices and unemployment, graph the interest rate effect of a Fed bond purchase and its effect on output, and explain how the rate change moves the dollar, exports and imports. Unit 3, Unit 4, Unit 6
• Question 2 · 7 points Who wins and loses from unexpected inflation Explain how unexpected inflation affects a saver with a fixed-rate deposit and a business paying back a fixed-rate loan, name a fiscal and a monetary policy to fight inflation, and say how lasting inflation affects the nominal interest rate and the currency's value. Unit 2, Unit 3, Unit 4
• Question 3 · 7 points Cars and tractors: advantage and trade Using two production possibilities lines, decide which country has the absolute advantage in tractors and the comparative advantage in cars, which one imports cars, and explain how one country gains at a one-for-one trade ratio. Unit 1

2003, Form B

This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 15 points Deficit spending, the currency and trade Graph an economy below full employment and show the short-run effect of more deficit spending, graph the loanable funds market to find the real interest rate change, then explain the effects on the currency's value, exports, imports, the trade balance and long-run growth. Unit 3, Unit 5, Unit 6
• Question 2 · 7 points Food and machines: advantage and terms of trade Read two production possibilities curves to identify absolute and comparative advantage, decide which country imports food, and propose terms of trade both countries would accept. Unit 1
• Question 3 · 10 points Phillips curves and three shocks Sketch the Phillips curves for the short and long run, identify how more government spending and lower expected inflation move the inflation rate, the unemployment rate and the short-run curve, and say how larger unemployment benefits move the long-run curve. Unit 5, Unit 2

2002

This exam had three free-response questions with 10 minutes of planning and 50 minutes of writing, and the directions suggested spending about half the time on Question 1 and splitting the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 11 points Fighting high unemployment with fiscal and monetary policy Pick a fiscal policy to lower unemployment, graph its effect on output and prices while the economy stays below full employment, and explain the effect on interest rates. Then name the open market purchase the Fed would use and graph how it moves interest rates, output and the price level. Unit 3, Unit 4
• Question 2 · 5 points Five changes that shift long-run aggregate supply For each of five changes, such as fewer people in the labor force, a deficit from a tax cut, better technology, more education and more saving, explain whether potential output rises or falls and why. Unit 5, Unit 3
• Question 3 · 7 points Interest rate gap moves the yen and trade Explain which way financial capital flows when US real rates rise and Japanese rates fall, graph the market for yen to show the change in its value against the dollar, and explain the effect on US imports from and exports to Japan. Unit 6

2002, Form B

This exam had three free-response questions with 10 minutes of planning and 50 minutes of writing, and the directions suggested spending about half the time on Question 1 and splitting the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 14 points Investment collapse and the policy response Graph what a sharp fall in investment does to output and prices and say what happens to employment. Then explain how a fiscal policy and an open market operation could each offset it, and what continuing the monetary policy does to inflation and the currency in the long run. Unit 3, Unit 4, Unit 6
• Question 2 · 7 points Swapping the income tax for a sales tax Say how replacing the income tax with an equal revenue sales tax changes consumption and national saving, use a loanable funds graph to show the effect on the real interest rate and investment, and explain the result for long-run growth. Unit 4, Unit 5
• Question 3 · 6 points Capital inflow and a country's currency Use a foreign exchange graph to show how money flowing into Country X changes the value of its currency, then explain what that change does to the country's exports and imports. Unit 6

2001

This exam had three free-response questions with 10 minutes of planning and 50 minutes of writing, and the directions suggested spending about half the time on Question 1 and splitting the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Government spending versus a corporate tax cut Graph the short-run effect of more government spending on output and prices and explain what happens to interest rates and investment. Then graph and explain how a cut in corporate profits taxes affects aggregate demand, long-run supply, output and prices, and show its effect on a production possibilities curve. Unit 3, Unit 5
• Question 2 · 4 points Higher European interest rates and the dollar Explain how a rise in European real interest rates, with US rates unchanged, affects foreign buying of US financial assets, the value of the dollar, and US exports and imports. Unit 6
• Question 3 · 7 points A cash deposit and money creation Work through a $1,000 cash deposit with a 20 percent reserve requirement: the immediate effect on the money supply, how much the bank can lend, the most the whole banking system can create, and one reason the full amount may not happen. Unit 4

2000

This exam had three free-response questions with 10 minutes of planning and 50 minutes of writing, and the directions suggested spending about half the time on Question 1 and splitting the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 10 points Tax cut or spending increase in a recession Graph an economy in a deep recession, decide whether a tax cut or an equal increase in government purchases raises real GDP more and why, explain how a personal tax cut affects consumption, GDP, prices, imports and exports, and explain how more net investment shifts aggregate demand and long-run supply. Unit 3, Unit 5
• Question 2 · 4 points Dollar and franc with trade and interest shocks In a two country world with flexible exchange rates, explain how more US demand for French goods affects the supply and value of the dollar, then how higher US real interest rates affect the dollar's value and the quantity of dollars supplied. Unit 6
• Question 3 · 7 points A smaller money supply in a closed economy Graph the money market to show how a cut in the money supply changes interest rates, explain how that interest rate change affects consumption, investment and government spending, and graph the short-run effect on output and the price level. Unit 4, Unit 3

1999

This exam had three free-response questions with 10 minutes of planning and 50 minutes of writing, and the directions suggested spending about half the time on Question 1 and splitting the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.

• Question 1 · 9 points Rising interest rates in an open economy Explain how a jump in real interest rates affects investment, the currency's value and exports, graph the short-run effect on output and prices, and then explain how a fiscal action and a monetary action could each counter it, including effects on interest rates and bond prices. Unit 5, Unit 3, Unit 4, Unit 6
• Question 2 · 5 points Measuring GDP and what it misses Name two ways to calculate GDP and explain why they must match, give one thing GDP fails to capture, and name two facts you would need before saying a 4 percent rise in nominal GDP raised the typical person's living standard by 4 percent. Unit 2
• Question 3 · 5 points Net investment at full employment Explain how more net investment affects aggregate demand, the capital stock, long-run aggregate supply and output, then explain how it changes the production possibilities curve printed with the question. Unit 5, Unit 3, Unit 1