1999, 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.
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.
1 Read the question
The question is College Board's, from the 1999 exam. It starts on page 2 of the PDF. College Board no longer posts this exam, so it opens from the copy of College Board's PDF that the Internet Archive saved on September 28, 2023.
2 Write your answer
Answer each part the way you would on the exam, in full sentences, with your work shown. Your writing saves as you type.
3 Score it
Score your answer against College Board's scoring guidelines, one point at a time. Give yourself a point only when your answer says what the guideline asks for.
Scoring guidelines (PDF, page 2)
Question, scoring guidelines and Chief Reader report: College Board, from the Internet Archive. The title, summary are ours.