FRQ answers · 2025 AP Macroeconomics
This page gives worked answers to every part of the 2025 AP Macroeconomics free-response questions, Set 1: Question 1 (10 points), Question 2 (5 points), and Question 3 (5 points). For each part you get the exact direction, label, or number the rubric rewards, plus the one reason why it earns the point.
Every answer here is checked line by line against the official College Board scoring guidelines, which are linked at the top and bottom of this page. We paraphrase each prompt in our own words to respect College Board's copyright, so open the official FRQ PDF to read the exact question text.
This covers the main released Set 1. College Board administers other forms of the exam, so if your test asked different numbers or scenarios, the method still applies but your specific answers will differ.
Use it to self-score honestly, one part at a time. Give yourself the point only if your response names the same direction and reasoning the rubric requires, then drill any graph you missed on EconLearn's interactive sandbox.
Official question PDF: College Board, 2025 free-response questions · official scoring guidelines
10 points · Practice the foreign exchange market
Draw the short-run and long-run Phillips curves for an economy in long-run equilibrium and mark the starting point as P.
Put inflation rate (%) on the vertical axis and unemployment rate (%) on the horizontal axis. Draw the short-run Phillips curve (SRPC) sloping downward. That earns the first point.
Draw the long-run Phillips curve (LRPC) as a vertical line at the natural rate of unemployment. Label point P where the SRPC crosses the vertical LRPC. Because the economy starts in long-run equilibrium, P sits on both curves. That earns the second point.
2 points: 1 for a labeled downward-sloping SRPC, 1 for a vertical LRPC with point P at the intersection
New residential construction starts; state whether short-run real output rises, falls, or is unchanged and explain.
Real output increases in the short run.
New residential construction is investment spending (I), a component of aggregate demand, so aggregate demand rises and short-run real output rises with it.
1 point for stating output increases because construction raises investment and thus AD
On the part A graph, with expectations unchanged, show the short-run effect of the construction as a new point labeled S.
Higher aggregate demand lowers unemployment and raises inflation, so the economy moves up and to the left along the existing SRPC.
Mark point S on the SRPC above and to the left of P (lower unemployment, higher inflation). Because inflationary expectations do not change, the SRPC itself does not shift; you only move along it.
1 point for a point S on the SRPC to the left of P
With flexible exchange rates and a zero capital and financial account, draw the forex market for the crown and show how a new tariff on imports affects crown supply and its value.
Draw the foreign exchange market for the Vortanian crown with the exchange rate (marks per crown, RHM/VTC) on the vertical axis and quantity of crowns on the horizontal axis, with upward-sloping supply and downward-sloping demand. That earns the first point.
Tariffs make Rhodaran imports more expensive, so Vortanians buy fewer imports and supply fewer crowns to the market to obtain marks. The supply of crowns shifts left, raising the exchange rate: the crown appreciates. That earns the second point.
2 points: 1 for a labeled foreign exchange market for the crown, 1 for a leftward supply shift causing appreciation
Given only the change in the crown's value from part C, state whether Vortania's net exports rise, fall, or stay the same in the short run.
Net exports decrease.
The appreciated crown makes Vortanian exports more expensive abroad and imports cheaper at home, so exports fall and imports rise, lowering net exports.
1 point for stating net exports decrease
Given the change in net exports, state and explain what happens to Vortania's capital and financial account balance.
The capital and financial account (CFA) moves into surplus.
Lower net exports push the current account into deficit. Because the balance of payments must sum to zero (CA + CFA = 0), the CFA has to move into an offsetting surplus.
1 point for the CFA moving into surplus, explained by CA + CFA = 0
Given the change in net exports, state what happens to employment in Vortania in the short run.
Employment decreases.
Lower net exports reduce aggregate demand and short-run real output, so firms need fewer workers.
1 point for stating employment decreases
To restore the crown's pre-tariff value, state whether the central bank buys or sells crowns and explain.
The central bank would sell crowns.
Selling crowns increases the supply of crowns in the foreign exchange market, which lowers the exchange rate and depreciates the crown back toward its lower, pre-tariff value.
1 point for selling crowns because the added supply depreciates the crown
5 points · Practice the reserve and money market
In a limited-reserves banking system below full employment, name the open-market operation that moves the economy toward full employment.
Country L would buy bonds (an open-market purchase).
Buying bonds adds reserves to the banking system, which lowers the policy interest rate and raises aggregate demand toward full employment.
1 point for stating the central bank buys bonds
In an ample-reserves banking system below full employment, name the specific monetary policy action that moves the economy toward full employment.
Country A would lower its administered rates, specifically decrease the interest rate paid on reserves (and/or the overnight reverse repo rate).
In an ample-reserves system the central bank sets the policy rate directly through administered rates rather than by changing the quantity of reserves, so cutting those rates lowers the policy rate and stimulates spending.
1 point for decreasing administered rates or interest on reserves
Draw the reserve market for the ample-reserves country and show how the part B action affects the policy rate.
Draw the reserve market with the policy rate on the vertical axis and quantity of reserves on the horizontal axis. Demand slopes downward and then flattens at its lower bound; draw the vertical reserve supply curve crossing demand on that flat, ample portion. That earns the first point.
Show the administered rate falling, which lowers the flat lower bound of the reserve demand curve, so the policy rate falls from PR1 to PR2. That earns the second point.
2 points: 1 for supply crossing demand in the ample range, 1 for a lower administered rate cutting the policy rate
If the ample-reserves country takes no action and stays below full employment, state and explain what happens to short-run aggregate supply as it self-adjusts.
Short-run aggregate supply increases (SRAS shifts right) until output returns to full employment.
With a recessionary gap and no policy action, high unemployment puts downward pressure on nominal wages and other input prices, and lowers inflationary expectations. Falling input costs shift SRAS right until the economy self-corrects at full employment.
1 point for SRAS increasing to full employment as input prices or expectations fall
5 points · Practice the AD-AS model
With 2021 as the base year, state whether 2021 real GDP is greater than, less than, or equal to 2021 nominal GDP and explain.
Real GDP in 2021 equals nominal GDP in 2021.
In the base year prices have not changed from the base prices, so real values equal nominal values by definition.
1 point for equal, because 2021 is the base year
Calculate 2022 real GDP for Middleland and show the work.
Real GDP in 2022 is $1,190.
Value the 2022 quantities at base-year (2021) prices: (11 x 50) + (4 x 70) + (12 x 30) = 550 + 280 + 360 = 1,190. The quantities are the same in both years, so only the base-year prices are used.
1 point for $1,190 with work shown
With 2022 potential real GDP at $1,150, draw AD, SRAS, and LRAS and show equilibrium output and price level (Y1, PL1) and full-employment output (YF).
Draw price level on the vertical axis and real GDP on the horizontal axis, with downward-sloping AD and upward-sloping SRAS. Mark their intersection and label the equilibrium price level PL1 and equilibrium output Y1. That earns the first point for subpart i.
Because potential output ($1,150) is below equilibrium output ($1,190), draw a vertical LRAS to the left of Y1 and label it YF. That earns the second point for subpart ii. This is an inflationary (positive) output gap.
2 points: 1 for PL1 and Y1 at the AD-SRAS intersection, 1 for a vertical LRAS left of Y1 labeled YF
With an MPC of 0.8, calculate the minimum change and direction of government spending needed to close the output gap in the short run, showing the work.
Decrease government spending by $8.
The spending multiplier is 1 / (1 - 0.8) = 5. The output gap is potential minus actual: 1,150 - 1,190 = -40. Minimum change in government spending = output gap / multiplier = -40 / 5 = -8, a decrease of $8 to close the inflationary gap.
1 point for a decrease of $8 with work shown
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