AP Macroeconomics Exam (FRQ 1)

FRQ #1 will feature an aggregate demand and supply graph showing a negative output gap, requiring an explanation of long-run self-adjustment (without policy), using fiscal policy (potentially tax cuts or transfer payments) to close the gap, including spending multiplier calculations (e.g., $400 billion gap, MPC 0.8), and connecting it to government deficits, crowding out, and the loanable funds market graph.