AP Macro Unit 3 Review: National Income and Price Determination
AP Macro Unit 3 covers aggregate demand, the multipliers, short-run and long-run aggregate supply, AD-AS equilibrium, self-correction, and fiscal policy. At 17–27% it can be the single largest chunk of the exam, and the AD-AS graph it introduces shows up in nearly every FRQ.
What's in Unit 3
- 1Aggregate demand and its components (C + I + G + Xn)
- 2Spending and tax multipliers (MPC and MPS)
- 3Short-run aggregate supply (SRAS)
- 4Long-run aggregate supply (LRAS) and potential output
- 5Equilibrium in the AD-AS model (output gaps)
- 6Short-run changes in AD and AS
- 7Long-run self-adjustment
- 8Fiscal policy (discretionary) and automatic stabilizers
Study this unit free on EconLearn
AD/AS model, macro equilibrium, output gaps, and macro shocks.
Full lesson, practice questions & flashcards →SRAS vs. LRAS and the long-run adjustment process.
Full lesson, practice questions & flashcards →Government spending, taxation, multipliers, and budget deficits.
Full lesson, practice questions & flashcards →What to master for the exam
- Draw the full AD-AS graph with LRAS at full employment; show recessionary and inflationary gaps.
- Compute multipliers: spending = 1/MPS, tax = −MPC/MPS; know why the tax multiplier is smaller.
- Trace fiscal policy: government spending or tax changes → AD shifts → output, price level, unemployment.
- Explain self-correction through wage adjustment shifting SRAS (see our SRAS vs LRAS guide).
AP Macro Unit 3: common questions
What is on AP Macro Unit 3?
The AD-AS model: aggregate demand and its shifters, spending and tax multipliers, SRAS and LRAS, output gaps, long-run self-adjustment, and fiscal policy with automatic stabilizers. At 17–27% of the exam it is potentially the largest unit, and its graph anchors most FRQs.
What is the multiplier formula in AP Macro?
The spending multiplier is 1 ÷ MPS (equivalently 1 ÷ (1 − MPC)); the tax multiplier is −MPC ÷ MPS, one smaller in absolute value because part of any tax cut is saved rather than spent. With MPC = 0.8, the spending multiplier is 5 and the tax multiplier is −4.