5 Steps to a 5 AP Macroeconomics 2019

AP Macroeconomics Practice Exam 1 ❮ 195

Question 3 (6 points)

Part (A): 3 points
These are graphing points, but to get all points, you need to explicitly incorporate all of the
given information in the Phillips curve graph.

1 point: Graph axes that show the unemployment rate on the horizontal axis and the infla-
tion rate on the vertical axis.

1 point: Show the downward-sloping SRPC intersecting the vertical LRPC.

1 point: At the intersection of SRPC and LRPC, identify an unemployment rate of 4 percent
on the horizontal axis and an inflation rate of 3 percent on the vertical axis.

Part (B): 3 points
i. 2 points. A short sentence will suffice as long as you state that there will be a decrease
in real GDP and a decrease in the price level.

ii. 1 point. A change in AD does not shift either Phillips curve; it causes a movement
along the SRPC. The reason is that shifting AD does not cause the level of full employ-
ment, and thus the natural rate of unemployment, to change. Because unemployment
is rising and the price level is falling, you would show a movement downward and to
the right on the SRPC.

Unemployment %

SRPC

LRPC

Inflation

4%

3%

Unemployment %

SRPC

LRPC

Inflation

4%

3%