LIVE AP Macro Exam Q&A and FRQ Predictions

"I can say without a doubt you're going to have to draw aggraate demand and supply or the Phillips curve."

"Fear responds number one I think is going to be aggra demand on supply showing a negative output gap. So right now in the back of your brain see if you can do this. I think they're going to ask you for a long run self-adjustment... Well, assume instead you use fiscal policy and you have to explain fiscal policy to close that gap... Then I think they're going to work in the idea of the spending multiplier and give you an amount of the gap and say there's a $400 billion gap. The marginal pensity to consume is 0.8. Close the gap given a cut in taxes... Then I think they're going to say, okay, this causes a deficit... and what's going to happen to the loanable funds market and the idea of crowding out... you're going to be doing aggreate demand and supply which is the graph also the loanable funds market as well and then doing the calculation for that."

"Now, if it's not that, it could be a positive output gap or it could be a Phillips curve. They could do the exact same questions except draw a Phillips curve, show a negative output gap, and make sure you can draw it on that as well."

"Next one is free response number two. I'm going on a limb here. I'm say it's going to be balance bank balance sheets... calculate the reserve requirement... if there's a change in there and they say, okay, someone deposited $5,000 or someone withdrew $5,000. How's that going to affect the uh the the both the required reserves for this particular bank or the excess reserves for this particular bank? So, make sure you can do that... Then, I think they're going to start talking about the idea of the reserve market graph. I think this is going to be a monetary policy question... So, expect to draw the reserve market graph... I think it'll be on this year."

"The last fair response I think is going to be pulling from unit six and we're going to go to foreign exchange and balance payments. So the way balance payments would look like is they would say here's some transaction is this part of the current account or the capital and financial account and explain... And then they'll switch off and say okay there's some monetary policy that occurred in this country that caused the interest rates to increase or decrease... And then they'll connect that to foreign exchange and they'll say okay well what's going to happen to the foreign exchange market if there's a higher interest rate... if interest rates go up then the demand for your currency in your country will also go up that's what I think it is"