Learn Extracted exam questions AP Macroeconomics 2024 Free Response · Set 2
2024 Free Response · Set 2
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Assume that the economy of Moneyland is in equilibrium with an actual unemployment rate equal to the natural rate of unemployment.
Draw a correctly labeled graph of the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, and show each of the following.
The current equilibrium real output and price level, labeled $Y_1$ and $PL_1$, respectively
The full employment output, labeled $Y_F$
Assume that consumer spending in Moneyland decreases from $110,000 to $100,000 as a result of a decrease in disposable income in Moneyland from $135,000 to $110,000.
Calculate the marginal propensity to consume in Moneyland. Show your work.
Show the short-run effect of the decrease in consumer spending in Moneyland on your graph in part (a), labeling the new equilibrium real output and price level $Y_2$ and $PL_2$, respectively.
Following the decrease in consumer spending, explain how the economy would adjust in the long run in the absence of any policy actions.
The central bank of Moneyland is concerned about the short-run effects of the decrease in consumer spending on the broader economy and is considering taking action rather than waiting for the long-run adjustment process. Assuming the banking system in Moneyland has ample reserves, identify a specific monetary policy action the central bank of Moneyland would take to increase consumer spending.
Draw a correctly labeled graph of the reserve market in Moneyland, and show the effect of the monetary policy action identified in part (d) on the policy rate.
How would the change in the policy rate shown on your graph in part (e) affect each of the following in Moneyland in the short run?
The quantity of national savings
Unemployment. Explain.
The table provided shows the quantity and price of food and clothing, the only two goods produced and consumed in the country of Maltrose, in year 1 and year 2. Assume that year 1 is the base year.
| Year 1 Price | Year 1 Quantity | Year 2 Price | Year 2 Quantity | |
|---|---|---|---|---|
| Food | $10 | 12 | $13 | 10 |
| Clothing | $5 | 16 | $4 | 20 |
Calculate the nominal GDP in year 2. Show your work.
Calculate the GDP deflator in year 2. Show your work.
What was the numerical value of the inflation rate from year 1 to year 2?
Assuming that the expected inflation rate between years 1 and 2 was 3%, were each of the following better off, worse off, or unaffected as a result of the economic conditions between year 1 and year 2?
People living on a fixed income
Borrowers with fixed interest-rate loans. Explain.
Assume that Jamaica has a cyclical unemployment rate of 4% and a balanced capital and financial account (CFA).
Identify a specific fiscal policy action that Jamaica's government would take to bring its economy to full employment.
Based solely on the short-run change in real output resulting from the fiscal policy action identified in part (a), what will happen to Jamaica's net exports? Explain.
Assume that Jamaica and Turkey are trading partners with flexible exchange rates. Jamaica's currency is the Jamaican dollar (JMD), and Turkey's currency is the lira (TRY). Draw a correctly labeled graph of the foreign exchange market for the Jamaican dollar relative to the lira, and show the effect of the change in net exports identified in part (b) on the supply of the Jamaican dollar and the international value of the Jamaican dollar.
How will the change in net exports identified in part (b) affect Jamaica's capital and financial account (CFA)? Explain.