== 2012 AP Macroeconomics ==

Test Preparation AP Test Preparation
141

<p>the frq is now released on CB</p>

142

<p>Instead of saying capital stock I saved stock of capital… is that going to be minus points or is the idea going to come across well enough? Thanks.</p>

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<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;

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<p>what is the answer to 1. (c) (i) in the FRQ?</p>

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<p>More GDP=more income=more purchases of foreign goods(so NX decrease, and CA deficit increases)=more demand for foreign currency=appreciation of foreign currency=depreciation of the bera</p>

146

<p>Can somebody go over second frq</p>

147

<p>a. 10%
b. Decreases by 5k, MS doesn’t change, ER are 500
c. Borrow from other banks</p>

148

<p>Garfield, if they have a higher GDP doesn’t that mean they would rely less on foreign exports because they are producing more domestic goods? Higher GDP doesn’t always equal higher income.</p>

<p>Also, does anyone know what component of aggregate demand would change in #3di ? And would LRAS remain unaffected?</p>

149

<p>Well, the question asks what occurs as a result of the GDP increase; producing more goods does not occur AS A RESULT, but is merely the definition of increased GDP…and increased GDP DOES mean increased income, since the sale of the produced goods has to eventually become someone’s income. So, people make more money and buy more foreign goods than they did previously. Perhaps they produce more domestic goods, but that doesn’t mean they automatically export them…</p>

<p>3d is capital, and it shifts LRAS to the right.</p>

150

<p>But increased income doesn’t automatically mean an increase in imports. The money can be used to purchase goods within the country. An increase in GDP, however, means less incentive to import foreign goods which would lower the CA deficit and cause the bera to appreciate.</p>

151

<p>Answer to 1Bi , 1biii anyone?</p>

152

<p>1bi) OMO would be Fed buys bonds
1biii) interest rate decreases</p>

153

<p>@pch</p>

<p>Higher income DOES mean they purchase foreign goods. If the assumption that a higher GDP means more income then it would mean a further shift toward deficit in capital account. Also, the higher PL due to higher AD means demand for the bera decreases causing it to depreciate.</p>

154

<p>Here are my answers to the FRQs. Let me know what you guys think…</p>

<p>[Question</a> 1 - Solutions](<a href=“http://desmond.imageshack.us/Himg140/scaled.php?server=140&filename=macro1m.jpg&res=landing]Question”>http://desmond.imageshack.us/Himg140/scaled.php?server=140&filename=macro1m.jpg&res=landing)
[Questions</a> 2 & 3 - Solutions](<a href=“http://desmond.imageshack.us/Himg28/scaled.php?server=28&filename=macro23.jpg&res=landing]Questions”>http://desmond.imageshack.us/Himg28/scaled.php?server=28&filename=macro23.jpg&res=landing)</p>

155

<p>FOr #1c, I can get credit on part ii even if I got part i wrong?</p>

156

<p>Agree with pch340. </p>

<p>Decrease in interest rate -> Decrease in Financial Investment -> Currency Depreciation -> Increase in Exports</p>

157

<p>Can anyone predict what my score out of 30 will be, if i only got 1c and 3c wrong, and everything else correct? Also anyone have a curve prediction? I feltl ike this years macro was a bit easy… 75-90 maybe? or worse?</p>

158

<p>AD curve shifts to right -> higher price level -> real income decreases !</p>

<p>INCREASE IN GDP DOES NOT MEAN INCREASE IN INCOME.</p>

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<p>To sum up :</p>

<p>Decrease in interest rate -> Decrease in Financial Investment -> Currency Depreciation -> Increase in Exports</p>

<p>AD curve shifts to right ->higher GDP -> higher price level -> real income decreases</p>

<p>INCREASE IN GDP DOES NOT MEAN INCREASE IN INCOME.</p>

160

<p>^No, just no…</p>

<p>GDP, in one sense, measures the total income of the economy, so real GDP measures the real income of everyone.</p>