2005, 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.
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.
Lessons this question draws on
1 Read the question
The question is College Board's, from the 2005 exam. It starts on page 3 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 June 23, 2024.
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
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Scoring guidelines (PDF, page 4) What the exam readers saw (Student Performance Q&A)
Question, scoring guidelines and Chief Reader report: College Board, from the Internet Archive. The title, summary are ours.