### Common Errors - 2014 AP Macroeconomics Exam

```Results from the 2014
Macroeconomics Exam
Arthur Raymond
Muhlenberg College
Allentown, PA
Macroeconomics Test Development
Committee
Patti Brazill (CBA), Irondequoit High School, Rochester, NY
Uchenna Elike, Alabama A&M U., Normal, Alabama
Brian Held, Loyola High School, Los Angeles, CA
Holly Jones, The Pennington School, Pennington, NJ
Clark Ross (Co-Chair), Davidson College, NC
Gabriel Sanchez (Co-Chair), Bonita High School, La Verne, California
Neal Sheflin, Rutgers University, New Brunswick, NJ
CBA , “College Board Advisor”, is the liaison between the Committee and the College Board
Exam Statistics: Macroeconomics 2014
In 2014,100,407 operational (US domestic) exams were
scored and approximately 17,000 alternative and
overseas exams were scored. The statistics that
follow are from the operational exam.
In general, students performed better on the
macroeconomics exam in 2014 than in the previous
three years. They performed better on the multiple
choice section of the exam and just a little worse on
the FRQ of the exam.
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Exam Statistcs: Macroeconomics 2014
Composite Mean (MC plus FRQ)
54.6/90 (61%)
Multiple Choice
39.3/60 (66%)
FRQ
FRQ Total: 15.38/30 (51.3%)
FRQ 1: 5.47/11 (49.7%)
FRQ 2: 3.12/6 (52.0%)
FRQ 3: 2.63/5 (52.6%)
►
Exam Statistics: Macroeconomics 2014
Exam Scores
Score
5
4
3
2
1
Percentage
15.1 (+)
22.8 (+)
18.9 (+)
17.9 (-)
25.3 (-)
A “+” indicates an increase from 2013
A “-” indicates a decrease from 2013
Top Ten Errors: Macroeconomics 2014
Range of Success Rates on the 22
Individual FRQ Points
(Sample of n≈1000)
13.20%
81.7%
Error Number 10
Question 1 (e)
Based on the real interest rate change in part (d), what
is the effect on the long-run economic growth rate?
(The real interest rate increased due to an increase in
government borrowing to finance spending.)
Decrease
Error Number 9
Question 1 (c)
If the marginal propensity to consume is equal to 0.75,
calculate the maximum possible change in real gross
domestic product that could result from the \$100 billion
increase in government spending.
\$400 billion
Error Number 8
Question 2 (a) (i)
Assume that the Federal Reserve targets a lower federal
funds rate. (i) Which open market operation can the
Federal Reserve use to achieve the lower target?
Error Number 7
Question 3 (b) (ii)
Based on the change in United States exports in part (a),
answer each of the following. (Exports Increased)
(i) Will the United States current account balance remain at zero, be in surplus,
or be in deficit?
(ii) What will happen to real gross domestic product in the
United States in the short run? Explain.
Increase because an increase in exports increases
aggregate demand.
Error Number 6
Question 3 (c)
The South Korean currency is the won. Draw a
correctly labeled graph of the foreign exchange market
for the United States dollar. Show the effect of the lower
inflation rate in the United States on the won price per
United Stated dollar.
There are two points. One for a proper graph and one
for showing the effect on the won price per US dollar.
This point is about the latter.
Error Number 6
Question 3 (c) - Continued
e=Won/US \$
S of \$
e2
e1
D’ for \$
D for \$
Also correct is a decrease in supply, or both.
Q of \$
Error Number 5
Question 1 (f)
Now assume that instead of financing the \$100 billion
increase in government spending by borrowing, the
United States government increases taxes by \$100
billion. With this equal increase in government spending
and taxes, will the real gross domestic product
increase, decrease, or remain the same? Explain.
Increase
Error Number 4
Question 2 (c)
Assume that the Federal Reserve buys government
bonds from commercial banks. Based only on this
transaction, will the level of required reserves in the
commercial banks increase, decrease, or remain the
same?
Remain the same
Error Number 3
Question 2 (d)
Another monetary policy action involves the discount
rate. Define the discount rate.
The discount rate is the interest rate charged by the
Federal Reserve to commercial banks for funds
borrowed from the Federal Reserve.
Error Number 2
Question 1 (f)
Now assume that instead of financing the \$100 billion increase in
government spending by borrowing, the United States government
increases taxes by \$100 billion. With this equal increase in
government spending and taxes, will the real gross domestic product
increase, decrease, or remain the same? Explain.
Real GDP increases because the multiplier for
government spending is larger than the multiplier
for taxes.
Error Number 1
Question 1 (e)
Based on the real interest rate change in part (d), what is the effect
on the long-run economic growth rate? Explain.
(The real interest rate increased due to an increase in
government borrowing to finance spending.)
The economic growth rate decreases because
a higher real interest rate reduces the
growth rate of the stock of capital.
```