<p>quantity demand is a shift along the curve, shift in demand is a shift in the whole curve to the left/right. things that shift demand are timer.
Trends
Income
Market Size
Expectations
Related goods</p>
<p>What’s the deal on partial credit for part II? For example, if I accidentally shifted AS left instead of right, and all of my subsequent answers were correct if AS did shift left, would I get zero credit?</p>
<p>Hello everybody!</p>
<pre><code>I am doing AP Macroeconomics and I have encountered some questions on past exams from the College Board website that are really similar but for some reason that I would like to know, involve different approaches. Here are the questions that I need somebody to kindly clarify to me. 
</code></pre>
<p>What is the difference between these 2 scenarios:</p>
<p>1) In Country Z, the required reserve ratio is 10 percent. Assume that the central bank sells $50 million in government securities on the open market.</p>
<p>Find the maximum possible change in the money supply</p>
<p>Well, my answer would be to multiply 50 by one/ RRR = $500,000, then subtract 50 from 500,000 = $450,000. HOWEVER, the answer = $500,000</p>
<p>Here is the 2nd question:</p>
<p>2) Assume that the RRR= 20 percent and that banks hold no excess reserves and Kim deposits $100 of cash from her pocket in to her checking account.</p>
<p>Find the maximum total change in demand deposits in the banking system and find the maximum change in the money supply</p>
<p>Alright for the first part of the question I said 100 * 1/20%
For the second part, I said maximum change in money supply = $400. Then, obviously, a subtraction has taken place. Why didn’t the answer key subtract from the original deposit in the question number 1? Shall I just list all my steps in the exam tomorrow in case… ?</p>
<p>Thank you for your time</p>
<p>I’ve taken Micro and Gov. Going to teach myself Macro overnight. Wish me luck.</p>
<p>^AU94Egypt
I am having the exact same problems!</p>
<p>For me, I am just going to do the simple way if the question involves bonds or securities, I have no clue why they do something different though.</p>
<p>To Au94Egypt
My teacher told me to simply multiply the amount by the ratio. So in the first question, multiply 50 million by 10 and that is the answer. Do not subtract the original. Think about it this way, if the ratio was 50% and the $100 was deposited, then $100 + $50 + $25 +$12.5 … equals $200 which is $100x2. The same applies to the 2nd question.</p>
<p>yeah. I am confused on that one too. I mean on FRQ, sometimes they multiply by the multiplier and then subtract the required reserve, but sometimes, they multiply with multiplier and don’t subtract. Can anyone answer this???!?</p>
<p>I don’t really know how to explain it , but just memorize that scenario. i am sure it is a common one. however the first question asks about the money supply change done by the gov and the other one asks about money supply by bank so i think they are two different things so you can look at it that way</p>
<p>The only thing I can think of is in question 1, the government is selling bonds, therefore decreasing the money supply. Since it’s taking money out of the economy, you don’t take out what the reserve ratio conserves in the bank, because there’s nothing being deposited. On the other hand, I think if the government was buying bonds, then you would use the reserve ratio and subtract. But don’t take my word for it.</p>
<p>thanks, Starchywinky. I think you are right. Does anyone have 2010 Released Macro exam?
I can give you other released exams if you want because I have a lot.</p>
<p>To answer the RR ratio question/govt bonds.</p>
<p>If the government buys bonds they are directly increasing the banks excess reserves so the RR doesn’t apply so you don’t subtract anything. You only multiply by 1/.2 which is 5</p>
<p>If a person puts their money in, the bank has to hold some of it in this case .2. So then you subtract $20 from the initial $100 deposit and mult by 5</p>
<p>So you never subtract if thr govt is buying bonds, only when people are because the bank can’t risk not having any reserves if the person wants their money back </p>
<p>Hope this helps</p>
<p>Here’s a question: What happens to exports when the interest rate decreases?</p>
<p>I thought of two contradictory arguments:</p>
<p>1) interest rates decrease → currency depreciates → exports increase
2) interest rates decrease → investment/consumption increases → AD increases → price level increases → inflation → exports decrease </p>
<p>Can anyone resolve this?</p>
<p>Well, for your first argument, an increase in exports means an increase in AD, which will lead to price levels increasing, inflation, and exports eventually decreasing.</p>
<p>*Scuba32steve</p>
<p>I am sure that if the government buys bonds, you have to subtract the required reserve from the calculated value. :)</p>
<p>2007 Question 1 has a similar question:</p>
<p><a href=“Supporting Students from Day One to Exam Day – AP Central | College Board”>Supporting Students from Day One to Exam Day – AP Central | College Board;
<a href=“Supporting Students from Day One to Exam Day – AP Central | College Board”>Supporting Students from Day One to Exam Day – AP Central | College Board;
<p>Interest rate rising -> appreciation -> exports fall was their rationale</p>
<p>So go with your first argument.</p>
<p>@cocksure
Have any sources?
<a href=“Supporting Students from Day One to Exam Day – AP Central | College Board”>Supporting Students from Day One to Exam Day – AP Central | College Board;
<p><a href=“Supporting Students from Day One to Exam Day – AP Central | College Board”>Supporting Students from Day One to Exam Day – AP Central | College Board;
<p>2009 Form B begs to differ.</p>
<p>No you don’t the government putting money directly into excess reserves so nothing is subtracted</p>
<p>If anyone wants some more multiple choice practice, I downloaded the app Econ AP Free today and it’s good practice. It explains the answer if you get a question wrong and has 10 MC for each unit. Good luck tomorrow :D</p>
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