Official AP MACRO Economics Discussion 2011

Test Preparation AP History & Social Sciences
61

I’m taking the late test the 18th due to state testing during the actual test date. Can anyone talk about a few things for me?</p>

Loanable Funds Market - When do I use this graph, what are the determinants of both supply and demand of loanable funds?</p>

Exchange Rates and World Economy - How does the supply and demand for a currency change and how do changes in one country affect another? My teacher sucks and didn’t teach us this chapter at all, so if someone just wants to go over all of the stuff that could be on the AP test it would be awesome. </p>

:)</p>

62

So…does someone who is confident in their answers want to explain #2 and #3?
I think I got all of #1</p>

63

so foreign investment shifts demand right? Supply is shifted by a change in savings.</p>

64

appleandrice, if you could be more specific I could try to answer any questions.</p>

65

Number three the last part- What effect did the M1 have on Money supply?</p>

66

Foreign investment (capital flow) shifts supply in the loanable funds market. This was a terrible choice by the AP to include…most textbooks don’t even include this info.</p>

67

Depositing cash into a bank will not change M1 (both cash and demand deposits are included in M1).</p>

68

How many points do you think that part was worth? i think i missed it…I put indeterminate…and some explaining…so any points there?</p>

69

I assume its safe to talk about it now. For number two: The supply of loanable funds shifts right as countries in the European Union increase investment in Japan. This reduces real interest rates. The decrease in real interest rates increases interest sensitive components of consumption and investment. This increases aggregate demand and real GDP. The increase in RGDP increases the employment rate. </p>

I agree this was a terrible question. Only 3 people in my class of 30 kids answered that correctly. I assume this question will help the curve.</p>

For number 3, the reserve requirement was .20. The change in excess reserves was $4,000. Demand deposits I’m not 100% sure of it but I put it changed by $5000. </p>

E: Wrong on the M1 part =/ Oh well</p>

70

collegegrabber, it was only worth one point (out of a seven point question).</p>

71

So does M1 decrease or no effect?</p>

72

Just re-read the section and it’s no effect.</p>

73

For the economics tests, do they also give you points if you use an incorrect answer correctly on a subsequent part? I know they do this in the sciences.</p>

74

dream4yale: You are correct that the reserve requirement was 20%. I’m pretty sure the change in excess reserves is $5,000 since the inflow of $5,000 doesn’t impact the bank’s liabilities. The change in demand deposits is $0. </p>

This was a terrible, terrible question.</p>

75

For number one on the philips curve the point is to the right of the LRPC right?</p>

76

@ao200 You’re absolutely right. Funny thing is I was looking at the page that this was explained on but someone convinced me to close the book and stop worrying haha</p>

@collegegrabber That’s where I put it.</p>

77

What happens to the price of bonds in the open-market when the Federal Reserve buys bonds?</p>

78

@leadlol</p>

i think price of bonds goes up, because either the supply of bonds available on the open market decreases. or the demand for them increases because the fed is buying them. oh well, either way the price goes up. :D</p>

79

For Number one letter (e) : </p>

<li>If government and the federal reserve take no policy action due to the recession what will happen to the natural rate of unemployment in the long run?</li>
</ul>

80

damn i got the foreign investment one wrong… would they still take off for the second part too if i put the employment level would fall, since that still is wrong but fits if real interest rate goes up</p>