2026 AP Macro FRQs Explained

Añadido: 2026-05-12

[00:00:00]Hey macro students, this is Jacob Clifford. We've got the 2026 AP macro FRQs. Let's go over the answers.

[00:00:06]Overall, I really like these questions.

[00:00:08]They covered the basics, made you draw all the key graphs, and no major surprises or crazy stuff. Fees response number one tells you there's an economy with an inflationary gap. Use aggra demand supply to show what's going on in the economy. This is the graph you had to draw. It's usually worth two points with the PL1, Y1 being one point, and then having that vertical long run supply with YF being the second point.

[00:00:28]In B they say there's no policy action what's going to happen in the long run if the economy itself adjusts and explain again pretty straightforward to get the point you have to explain that wages and resource prices will increase in the long run that'll decrease the shortrun aggra supply curve causing it to shift to the left and returning the economy to full employment now they didn't ask you to draw it you just had to explain it that would get you the point now in part C they bring in monetary policy in this case they say the banking system has limited reserves in CI identify a specific open market operation that would get the economy pay back to full employment. Open market operations is buying and selling bonds.

[00:01:02]The right answer here was sell bonds.

[00:01:03]The central bank sells bonds. That would give you a point. No explanation required. In C2, they have you draw the money market graph, not the reserve market graph. This is what you drew. You showed a decrease in supply and an increase in the nominal interest rate.

[00:01:16]Again, this is likely worth two points.

[00:01:18]One for setting up the original equilibrium and the second point for showing that decrease in supply. Now on part D it says based solely on the interest rate change you just drew on the previous graph what's going to happen to the following remember the nominal interest rate went up so international capital flows will increase towards this country now to get the point you did have to explain so you had to say something like an increase in the nominal interest rate would lead to more foreign financial capital coming into the country because those foreigners want that higher rate of return D2 is just your standard relationship question if there's an increase in the nominal interest rate then bond prices are going to decrease for this there's no explanation required But you should understand the idea. When nominal interest rates go up, people don't want those old bonds. They want the new bonds because they have a higher yield. For D3, they're asking just another relationship. What's going to happen to private domestic investment?

[00:02:03]Well, if interest rates go up, then investment is going to fall. Again, no explanation required, but when interest rates go up, then private investors are going to invest less because it's more expensive to borrow. Now, in part E, it has you connect the decrease in investment spending that you just did with what's going to happen to unemployment. And it requires you to explain. And the right answer is you have to say something like unemployment is going to decrease because less investment spending leads to less aggreate demand and less hiring. Okay, that's it for free response number one.

[00:02:27]Like I said, pretty standard. Has you draw the key graphs and shows some key relationships. How did you do?

[00:02:31]>> Okay.

[00:02:32]>> Okay. Moving on to free response number two. It's got some standard calculations questions with unemployment and also has you draw the Phillips curve. They give you some data for an economy. They give you the labor force, the number of people who are not working but are looking for a job, number of people who are tired. When I first saw this question, I thought it said population on the top, not labor force. So, I thought you had to like subtract all these things out. It turns out, this is pretty easy. They gave you the numbers.

[00:02:53]In part A, it asks you how many people are employed in this country. To figure that out, you've got the labor force.

[00:02:59]They told you that. You just got to subtract out the number of people who are unemployed. That gives you what's left over, the number of people who are employed. But it turns out you didn't have to actually show your work. All you had to say was the number. It's 14,100,000 people. In part B, it has you calculate the unemployment rate and show your work. You had to set up the equation.

[00:03:15]The number of people unemployed divided by the number of people in the labor force times 100. Again, you didn't have to subtract out the number of people retired, the people who are not looking for work. They actually gave you the numbers. It's the number of people unemployed, which is 900,000 divided by the labor force, 15 million times 100 gives you 6% unemployment. Now, in part C, they have you draw the Phillips curve based on the numbers they gave you. To draw the graph correctly, you need to figure out where the economy is. Now, since the unemployment rate is 6% and they tell you the natural rate of unemployment is 3%, this economy has a negative output gap. Then you just had to fill in the numbers. The inflation rate was 2%. The long run Phillips curve shows the natural rate of unemployment, which is at 3% and the current unemployment rate is 6%. And they asked you to label this point X, so make sure you did that. This is probably worth two points. One for showing a negative output gap, and another one for putting in all the correct numbers. Now, part D is the only kind of tricky question in any of these few responses. If some individuals who are counted as employed retire, will unemployment increase, decrease or remain the same and explain.

[00:04:14]The right answer is unemployment will increase. Remember the unemployment rate is a ratio. The number of people are unemployed is going to stay exactly the same, but the number of people in the labor force is going to fall. So if the numerator stays the same, but the denominator gets smaller, the percent of people who are unemployed is going to increase. Again, the number of people who are unemployed is not going to increase because these people retired because those people don't count in the labor force. And when you divide the same number of unemployed people by a smaller total, the percent is going to increase. Okay, that's it for fear response number two. I hope you did well. Let me know in the comments below how you did on this free response. Okay, here we go. For question number three, they give you some information for this country, Lizland. They tell you their currency and they say they have a negative output gap, a recessionary gap of 600 million. In part A, they say policy makers are considering taking action to close a negative output gap and they have you use monetary policy and fiscal policy. In AI, they say the central bank is considering implementing monetary policy, but the banking system has ample reserves. Identify a specific monetary policy action that will close the negative output gap. No explanation required. All you had to say was to be a decrease in interest on reserves. But remember, because there's ample reserves, the traditional tools of monetary policy don't work. So, they won't accept saying a decrease in the reserve requirement or decrease in the discount rate or buying bonds. You couldn't say those ones. you had to say a decrease in interest on reserves or decrease administered rates. Either one of those will get you the point. In part A2, they switch it over to fiscal policy and they give you the marginal price to consume, which is 75, and say, "What's the minimum change in government spending to close that $600 million gap?" Actually, it's not dollars, it's crowns, but whatever. They do ask you to show your work. So, first you had to calculate the spending multiplier, which is one over the margin propensity to save, which is 1 over 0.25. So, the multiplier is four. Next, you had to divide the 600 crown gap by four.

[00:06:01]That'll give you the initial spending that you need to close the gap. So, the right answer, what they were looking for was an increase in spending of 150 million crowns. Be careful here. You couldn't just say 150 million. You had to say an increase because they asked you for what's the direction of the change. Also, hopefully you didn't just put 150. It's 150 million. Overall, pretty standard and straightforward. I talked about this specific skill in the review sessions I had before the exam.

[00:06:24]Now, in B, they ask a super easy question. And I'm actually surprised it's here. They say, "Assume the government does do the spending you just talked about. What's going to happen to the price level is going to increase, decrease, remain the same, and why?" All you have to do to get the point is say an increase in government spending would increase aggregate demand, which will increase the price level. Now, in part C, it goes from talking about monetary and fiscal policy all the way to unit 6 and foreign exchange. It says this country has a trading partner and it gives us their currencies and it says draw a correctly labelled graph for the foreign exchange market for this country based solely on the change in the price level you identified in part B show the change in the international value of the Lisland crown. So the price level in Lisland went up. Now what's going to happen to the currency in Lisland. Now this is going to be worth two points.

[00:07:06]One point for just drawing supply and demand showing the equilibrium exchange rate. You're going to get the second point by drawing the shift that occurred when there's an increase in the price level. Now, the good news is they're likely to accept two different right answers for this question. You could say one, a decrease in the demand for the currency because when price level goes up, other countries don't want to buy these goods because they now have a higher price. Or you could say there's an increase in supply because the people in Lisland don't want to buy things in their own country. They want to buy things from other countries because there's more inflation in their own country. Again, two right answers. And if you drew either one, you're probably going to get the point. as long as you made sure to show what happens to the exchange rate and the quantity, both of the original and the new equilibrium.

[00:07:44]Okay, that's it for the 2026 AP macro FRQs. I hope you did great. Let me know in the comments how you did. Thanks for watching my videos. Until next time.