Results from the 2014 Macroeconomics Exam

Arthur RaymondChief Reader, AP Macroeconomics

Muhlenberg CollegeAllentown, PA

Macroeconomics Test Development Committee

Patti Brazill (CBA), Irondequoit High School, Rochester, NYUchenna Elike, Alabama A&M U., Normal, AlabamaBrian Held, Loyola High School, Los Angeles, CA Holly Jones, The Pennington School, Pennington, NJClark Ross (Co-Chair), Davidson College, NCGabriel Sanchez (Co-Chair), Bonita High School, La Verne, CaliforniaNeal 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 ScoresScore Percentage

54321

15.1 (+)22.8 (+)18.9 (+)17.9 (-)25.3 (-)

A “+” indicates an increase from 2013A “-” 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 10Question 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 9Question 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 8Question 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?

Buy Bonds

Error Number 7Question 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 6Question 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 6Question 3 (c) - Continued

e=Won/US $

Q of $

S of $

D for $

e1

e2

D’ for $

Also correct is a decrease in supply, or both.

Error Number 5Question 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 4Question 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 3Question 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 2Question 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 1Question 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 becausea higher real interest rate reduces the

growth rate of the stock of capital.