Learn Extracted exam questions AP Macroeconomics 2026 Free Response
2026 Free Response
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The economy of Micanapy is in short-run equilibrium and is experiencing an inflationary gap.
Draw a correctly labeled graph of the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for Micanapy, and show each of the following.
The current equilibrium real output and price level, labeled $Y_1$ and $PL_1$, respectively.
Draw a correctly labeled graph of the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for Micanapy, and show each of the following.
The full-employment real output, labeled $Y_F$.
Assume that policymakers take no action to close the inflationary gap. Explain how Micanapy's economy will self-adjust to full employment in the long run.
Suppose instead that Micanapy's central bank is considering using monetary policy to close the inflationary gap in the short run. The banking system in Micanapy has limited reserves.
Identify a specific open-market operation that the central bank of Micanapy would implement to close the inflationary gap in the short run.
Draw a correctly labeled graph of the money market in Micanapy, and show the effect of the open-market operation identified in part C (i) on the nominal interest rate.
Based solely on the interest rate change shown on your graph in part C (ii), will each of the following increase, decrease, or remain the same in the short run?
International financial capital flows into Micanapy. Explain.
Based solely on the interest rate change shown on your graph in part C (ii), will each of the following increase, decrease, or remain the same in the short run?
The price of previously issued bonds in Micanapy.
Based solely on the interest rate change shown on your graph in part C (ii), will each of the following increase, decrease, or remain the same in the short run?
Private domestic investment spending in Micanapy.
Based solely on the change in private domestic investment spending identified in part D (iii), will the unemployment rate in Micanapy increase, decrease, or remain the same in the short run? Explain.
The economy of Foxhound is in short-run equilibrium with the macroeconomic data shown in the table.
| Labor force | 15,000,000 |
| Number of people not working but looking for work | 900,000 |
| Number of people who are retired | 200,000 |
| Number of people not working and not looking for work | 100,000 |
| Natural rate of unemployment | 3% |
| Actual inflation rate | 2% |
How many people are employed in Foxhound?
Calculate the actual unemployment rate in Foxhound. Show your work.
Draw a correctly labeled graph of the short-run and long-run Phillips curves for the economy of Foxhound, and label the short-run equilibrium point as X. Plot the relevant numerical values on your graph.
If some individuals who are counted as employed in Foxhound retire, will the unemployment rate increase, decrease, or remain the same? Explain.
Lizland is a small island nation, and its currency is the Lizland crown (LIZ). The economy of Lizland is in short-run macroeconomic equilibrium with a 600 million crown recessionary gap.
Policymakers in Lizland are considering taking action to close the recessionary gap in the short run.
The central bank of Lizland is considering implementing monetary policy. The banking system of Lizland has ample reserves. Identify a specific monetary policy action the central bank of Lizland would implement to close the recessionary gap in the short run.
The government of Lizland is also considering changing its spending, and the marginal propensity to consume is 0.75. Calculate the minimum change in government spending and identify the direction of the change required to fully close the 600 million crown recessionary gap in the short run. Show your work.
Assume that the government of Lizland decides to change its spending as calculated in part A (ii). Based solely on this change, will the price level in Lizland increase, decrease, or remain the same in the short run? Explain.
The nations of Lizland and Andoh are trading partners with flexible exchange rates. The currency of Andoh is the Andoh note (AND). Draw a correctly labeled graph of the foreign exchange market for the Lizland crown (LIZ). Based solely on the change in the price level in part B, show the change in the international value of the Lizland crown on your graph.