preparing for the ap economics exam · preparing for the ap economics exam ... j & p company...

Preparing for the AP Economics Exam

David MayerWinston Churchill High School

San Antonio, Texas

Overview• AP Exam Background• Structure Your Class to Improve

Performance• Multiple choice questions: Topics and

Types• Free Response Questions• Resources

AP Exam BackgroundFormat (Macro & Micro)

% of Grade

Number of Questions

Time Allotted

Reading Period

Section I 66 2/3 60 70 minutes

Section II 33 1/3 3 required 50 minutes 10 minutes

AP Exam BackgroundExam Data

• # of Exams– Compare Macro to Micro

• Examinees by Grade Level• Grade Distribution

– 54% scored 3 or higher on Macro– 65% scored 3 or higher on Micro

• Demographics– Which groups are overrepresented, which

are underrepresented?

Structure Your Class to Improve Performance

• Begin with the end in mind!– Think May 15th on September 1st

• It’s all about the Course Outline!

• Build in review time!

• Make sure their grade means something.

Multiple Choice Questions: Topics and Types

Multiple Choice Topics• Course outline• Percentages

Multiple Choice Types• Definitions/Classifying …38%

– True….EXCEPT (1/60)• Cause & Effect Chain …38%

– 1 … 50% of the Cause & Effect Chain Q’s– 2 … 33% of the Cause & Effect Chain Q’s– 3 or 4… 12% of the Cause & Effect Chain

Q’s• Calculation … 12%• Graphic Interpretation… 9%• I, II, III style Classifying… 3%

(Micro) Scarcity is correctly described by which of the following statements?I. Scarcity exists if there are more uses for

resources than can be satisfied at one time.

II. Scarcity exists if decisions must be made about alternative uses for resources

III. Scarcity would not exist in a society in which people wanted to help others instead of themselves.

(A) I only(B) II only(C) III only(D) I and II only(E) I, II and III

(Macro) If a country has a current account deficit, which of the following must be true?

(A) It must also show a deficit in its capital account.(B) It must show a surplus in its capital account.(C) It must increase the purchases of foreign goods

and services.(D) It must increase the domestic interest rates on its

bonds.(E) It must limit the flow of foreign capital

investment.

(Macro) Suppose that the consumer price index rises from 100 to 200. From this information we may conclude that

(A) each person’s real income is cut in half(B) consumer incomes are doubled(C) the prices in an average consumer’s market

basket are doubled(D) all consumer goods prices are doubled(E) all prices in the economy are doubled

(Micro) The diagram above shows the demand and supply curves for a normal good. The equilibrium price could rise from P1 to P2 if

(A) consumers’ incomes are increased(B) P2 were set as a legal maximum(C) subsidies on the product increased(D) the price of a complementary product

increased(E) costs of production were substantially lowered

Quantity

Pric

e

Supply

Demand

P1

P2

(Macro) In the graph above, AD denotes the aggregate demand curve, SRAS the short-run aggregate supply curve, and LRAS the long-run aggregate supply curve. If no policy action were taken, which of the following would move the economy to its long-run equilibrium?

(A) An increase in aggregate demand(B) An increase in exports(C) An increase in wages(D) A decrease in wages(E) A decrease in the expected price level

Real Output

Pric

e Le

vel

SRAS

AD

LRAS

(Macro) Assume Canadian consumers increase their demand for Mexican financial assets. How would the international supply of Canadian dollars, the value of the Mexican peso relative to the Canadian dollar, and Canadian net exports to Mexico change?

Supply of Value of CanadianCanadian Dollars the Peso Net Exports

(A) Increase Increase Increase(B) Increase Increase Decrease(C) Decrease Increase Decrease(D) Decrease Decrease Increase(E) Not change Increase Decrease

Free Response Questions

Typical Macro Long Free ResponseAssume that the United States economy is in a severe recession with no inflation.

(a) Using a correctly labeled aggregate demand and aggregate supply graph, show each of the following for the economy.

(i) Full-employment output(ii) Current output level(iii) Current price level

(b) The federal government announces a major decrease in spending. Using your graph in part (a), show how the decrease in spending will affect each of the following.(i) Level of output(ii) Price level

(c) Explain the mechanism by which the decrease in government spending will affect the unemployment rate.

(d) The Federal Reserve purchases bonds through its open-market operations.(i) Using a correctly labeled graph, show the effect of this

purchase on the interest rate.(ii) Explain how the change in the interest rate will affect

output and the price level.(e) Explain how the change in the interest rate you identified in part (d) will affect each of

the following.(i) International value of the dollar relative to other currencies(ii) United States exports(iii) United States imports

Typical Macro Short Free Response

Assume that two countries, Atlantis and Xanadu, have equal amounts of resources. Atlantis can produce 30 cars or 10 tractors or any combination, as shown by the line MN in the figure above. Xanaducan produce 20 cars or 40 tractors or any combination, as shown by the line PQ in the figure above.

(a) Which country has an absolute advantage in the production of tractors? Explain how you determined your answer.

(b) Which country has a comparative advantage in the production of cars? Using the concept of opportunity cost, explain how you determined the answer.

(c) If the two countries specialize and trade with each other, which country will import cars? Explain why.

(d) If the terms of trade are such that one car can be exchanged for one tractor, explain how Atlantis will benefit from such trade.

Tractors

Cars

Production Possibilities Curve for Xanadu

Production Possibilities Curve for Atlantis30

20

10 40

M

N

P

Q

Typical Micro Long Free ResponseJ & P Company operates in a perfectly competitive market for smoke alarms.

J & P is currently earning short-run positive economic profits.

(a) Using correctly labeled side-by-side graphs for the smoke alarm market and J & P Company, indicate each of the following for both market and the J & P Company.

(i) Price(ii) Output

(b) In the graph on part (a) for J & P, indicate the area of economic profits that J & P Company is earning in the short run.

(c) Using a new set of correctly labeled side-by-side graphs for the smoke alarm market and J & P Company, show what will happen in the long run to each of the following.(i) Long-run equilibrium price and quantity in the market(ii) Long-run equilibrium price and quantity for J & P Company

(d) Assume that purchases of smoke alarms creates positive externalities. Draw a correctly labeled graph of the smoke alarm market.(i) Label the market equilibrium as Qm(ii) Label the socially optimal equilibrium quantity as Qs.

(e) Identify one government policy that could be implemented to encourage the industry to produce the socially optimum level of smoke alarms.

Typical Micro Short Free Response

(a) Draw a correctly labeled graph showing a typical monopoly that is maximizing profit and indicate each of the following.

(i) Price(ii) Quantity of output(iii) Profit

(b) Describe and explain the relationship between the monopolist’s demand curve and marginal revenue curve.

(c) Label each of the following on your graph in part (a).(i) Consumer surplus(ii) Deadweight loss

Resources

preparing for the ap economics exam · preparing for the ap economics exam ... j & p company...

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