5 Steps to a 5 AP Macroeconomics 2019

AP Macroeconomics Practice Exam 2 ❮ 213

-^ Banks hold excess reserves rather than making loans.
-^ Borrowers do not redeposit their loans, but hold some as cash.

Question 2 (4 points)

Part (A): 1 point: Given for stating that lower interest rates make EU financial assets less
attractive to American investors, so fewer EU financial assets will be purchased.

Part (B): 1 point: Given for stating that decreased demand for the euro depreciates the euro
versus the dollar and appreciates the dollar against the euro.

Part (C): 1 point: Given for stating that a depreciating euro makes EU goods look like a
bargain to American consumers, increasing the demand for EU goods and services. The EU
exports more goods to the United States.

Part (D): 1 point: Given for stating that an appreciating dollar makes American goods look
more expensive to EU consumers, decreasing demand for U.S. goods and services. The EU
imports fewer U.S. goods.

Question 3: (6 points)

Part (A): 4 points
1 point: Given for showing a concave production possibility curve (PPC) with melons and
cupcakes labeled on the axes.

Melons

Cupcakes

F

R

i. 1 point: Given for identifying point F at some point on the PPC.

ii. 1 point: Given for stating that the PPC exhibits increasing opportunity costs. 1 point
for explaining that the concave shape means that increasing production of melons
(or cupcakes) requires giving up more and more units of cupcakes (or melons) because
the resources are not equally productive in producing melon and cupcakes. Some
resources are better suited to producing melons than they are at producing cupcakes.

Part (B): 1 point
1 point: Given for showing point R somewhere inside the PPC.

Part (C): 1 point
1 point: Given for showing the PPC increasing along the melons axis but not changing on
the cupcakes axis.