Macroeconomics Section II: Free-Response Questions
Directions: You have one hour to answer all three free-response questions: one long and two short questions. Spend the
first 10 minutes for planning, and in the remaining 50 minutes construct your responses. Explain your answers thoroughly
with examples and illustrations where appropriate.
- Assume the United States is experiencing growth and that inflation is approaching high levels.
A. Draw a correctly labeled graph illustrating this.
B. Which governmental policy will have an impact on this condition and why? Illustrate the impact of this
fiscal policy on aggregate demand.
C. Which monetary policy might be appropriate in this situation? - Let’s say there is a sudden increase in demand in the United States for Italian products. Explain how this increase
will have an impact on the following:
A. The money supply
B. The value of the dollar - Assume that a bank is left with no excess reserves and that someone makes a deposit in the amount of $1,000.
A. What will happen to the money supply?
B. What is the maximum effect that this deposit can have on the money supply with the reserve requirement at
20 percent?
Part IV: AP Macroeconomics & Microeconomics Tests