AP Macroeconomics: The Ultimate Guide

This guide covers everything you need to know about AP Macroeconomics!

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What Is Macroeconomics?

Macroeconomics is one of the two main branches of classic economics. Macroeconomics focuses on the economy as a whole. This is distinct from Microeconomics, which typically focuses on the behavior of individual consumers or companies. Macroeconomics considers a broad array of factors and how they impact entire countries or regions.

Macroeconomists try to forecast the behavior of markets and entire economies using analysis of things like output, interest rates, unemployment, and inflation.

On some level, humans have been engaged in the study of Macroeconomics since the dawn of civilization (as it concerns the exchange of goods within and between societies). However, as an academic discipline, Macroeconomics is a relatively new field. The study of classic economics begins with Adam Smith’s The Wealth of Nations, which proposed that there was an invisible hand guiding the market toward the fairest and most efficient distribution of resources.

This was generally held to be self-evident until the Great Depression of the 1930s. The scale of suffering and economic decline during the Great Depression convinced many economists that their existing models were inadequate. Clearly, markets would not always self-correct in a short period of time. A rethink was needed.

In the mid-1930s, John Maynard Keynes published The General Theory of Employment, Interest, and Money and completely upended the study of Macroeconomics. In this text, Keynes argued that a market could remain depressed indefinitely because of the self-interest and irrational actions of consumers and producers.

Keynes contended that the worst effects of the Great Depression could have been staved off had the government attempted to increase spending through a liberal fiscal policy. In essence, Keynes and his acolytes argued that government intervention was essential to the management of economic growth and that the free market was not necessarily rational or efficient.

There have been numerous revisions to Keynesian Economics in the intervening years – including the challenges set forth by Milton Friedman and the Monetarists, Robert E. Lucas Jr. and the New Classical School, Edward C. Prescott and the Real Business Cycle Models, and, recently, the resurgence of Keynesian thought through the New Keynesian Revolution.

However, all modern Macroeconomics is essentially derived from one conclusion: that the free market is vulnerable and should be fine-tuned by government intervention.

Basic Information About AP Macroeconomics

The AP Macroeconomics course is usually taught in just one semester. This distinguishes it from most other Advanced Placement classes which require two semesters to complete.

Many students choose to take the AP Macroeconomics and AP Microeconomics courses in the same year because they can do one each semester. If you are considering this option, it is probably better to do Microeconomics first because many of the lessons in Macro build on and challenge the principles of Micro.

It costs $95 to register for the test ($125 if you are an international student). Registration is usually done for you by your school. If you are taking the Advanced Placement class, your teacher will register you for the test. If you are not taking the class, you will have to ask a teacher or guidance counselor to register you. If you are homeschooled, you will have to register yourself. To register, contact the College Board by November of the school year that you want to take the test.

It is worth briefly noting that if the costs associated with taking the AP test are prohibitive for you, you can apply for a fee reduction. The College Board claims to be committed to ensuring all students can take Advanced Placement tests regardless of financial means, so do not be deterred by the cost! If you are unsure how to proceed with this step, talk to your guidance counselor or teacher; they will assist you.

Currently, Advanced Placement tests are available both in-person and online (though this is primarily to address the difficulties caused by COVID-19). In 2021, the paper, in-school test was administered on Monday, May 10th. The digital test was administered on Wednesday, May 19th and Wednesday, June 2nd. It is hard to be certain what the next few years will bring, but assuming a return to normal, the test will likely be administered in the middle two weeks of May in 2022.

Format of the AP Macro Test

The AP Macroeconomics Exam is divided into two sections. The first section is made up entirely of multiple-choice questions. You are given 70 minutes to answer 60 multiple-choice questions. The second section is the free-response section. This is made up of one long free-response question and two short free-response questions. You are given one hour to answer these three questions, which includes a ten-minute reading period.

The multiple-choice section is worth two-thirds of your final score, while the free-response questions are worth one-third. The long free-response question is worth one-sixth of the total score, and the other two short response questions are worth one-sixth together.

The material on the test is divided into six categories: Basic Economic Concepts, Economic Indicators and the Business Cycle, National Income and Price Determination, Financial Sector, Long-Run Consequences of Stabilization Policies, and Open Economy: International Trade and Finance. The test is weighted to place greater emphasis on the last three categories than the first three categories. The College Board provides the following breakdown:

• Basic Economic Concepts (5–10% of the exam)
• Economic Indicators and the Business Cycle (12–17%)
• National income and Price Determination (17–27%)
• Financial Sector (18–23%)
• Long-Run Consequences of Stabilization Policies (20–30%)
• Open Economy: International Trade and Finance (10–13%)

You can use this information to help you determine where to focus your studies. If you have limited time, it makes sense to focus more of your attention on stabilization policies than the business cycle, for example.

AP Macroeconomics Scoring

All Advanced Placement tests are ultimately graded on a scale of 1–5 with 5 being the highest score. The College Board notes that scoring a 3 or above means you are reasonably qualified for the study of Macroeconomics at the undergraduate level. A higher score reflects greater competency. Many colleges will allow you to exchange a score of 3 or above for college credit.

In recent years, more and more students have been earning 5’s. This is in part attributed to the growth of test-prep tutoring in the last decade. In 2020, about 20% of students scored a 5 and more than 60% of students scored a 3 or higher. The number of students who take the test is also growing rapidly, with 150,000 students having taken the test last year.

In short, the AP Macroeconomics test is one of the tests that students score the highest on. It has a high percentage of students who score a 5 and a high percentage of students who score above a 3. If you are looking for an Advanced Placement course to bolster your college resume, Macroeconomics is one of your safest options.

AP Macroeconomics Curriculum

The College Board states that AP Macroeconomics is a college-level course equivalent to one semester of introduction to economics. The purpose of the class is to introduce you to the principles that govern the entire economic system. There are no prerequisites for the study of Macroeconomics, though a solid foundation in math, science, and social sciences is recommended.

The AP Macroeconomics curriculum is intended to develop and test your skills in four key areas: Principles and Models, Interpretation, Manipulation, and Graphing and Visuals.

Principles and Models:

• Define economic concepts and models.
• Identify an economic principle or model given specific examples.
• Identify an economic model using calculations or data analysis.
• Describe the similarities and differences of economic models.
• Explain the limitations of economic models.

Interpretation:

• Explain economic outcomes.
• Describe what actions should be taken to achieve a specific economic outcome.
• Use multivariable equations to explain economic outcomes.
• Interpret economic outcomes using calculations or data analysis.

Manipulation:

• Manipulate economic models to produce different outcomes.
• Determine or predict the effect of one or more changes on the market.
• Use quantitative data to determine the effect of changes to the market.

Graphing and Visuals:

• Use graphs and tables to represent economic models.
• Draw and accurately label standard economic models.
• Interpret visual information to make determinations about different markets.
• Demonstrate the effect of changes to the market using graphs and visual representation.

In addition, the AP Macroeconomics curriculum is designed to provide the framework to master four central topics: Economic Measurements, Markets, Macroeconomic Models, and Macroeconomic Policies. These topics are meant to serve as the bedrock of the curriculum and should help you connect ideas across several chapters and subjects. You should keep these ideas in mind constantly throughout your studies because a firm understanding of them will help you comprehend all the material you might find on the test. Let us briefly examine those terms in more detail.

Economic Measurements

Economists use measurements to interpret past actions, monitor the economy, and predict future behavior. Companies and individuals, as well as national governments and other organizations, use these conclusions to inform business decisions. This means that the market is, in essence, constantly responding to the needs of individuals as well as the models of economists. Economic measurements are primarily covered in chapters 2, 4, and 5 of the course.

Markets

A competitive market should bring together consumers and producers to exchange goods for mutual although not necessarily balanced gain. The general laws of markets as outlined in Microeconomics can be applied in different contexts but with many additional factors in the consideration of Macroeconomic policy. This means that Macroeconomists still concern themselves with general principles like supply and demand. Markets are covered in chapters 1, 4, and 6 of your class.

Macroeconomic Models

Macroeconomic models are used to depict the relationship between various variables that interact in a competitive economy. They are designed through analysis of past and present economic principles and used to predict future economic outcomes. Many models are focused on the impact of various “shocks” to the economic system. Macroeconomic models are primarily taught in chapters 1, 3, and 5 of your AP Macro curriculum.

Macroeconomic Policies

Macroeconomic policies concern the decisions made by governments and central banks to regulate the economy. Fiscal policy is the name given to decisions made by the government, whereas monetary policy refers to decisions made by the central bank (like the Federal Reserve). Fiscal and monetary policy affect numerous factors in the economy like growth, output, employment, and inflation. Governments and central banks generally (but not always) seek to maximize the growth and security of the economy through routine intervention. These policies are the primary focus of the last four chapters of your AP Macroeconomics course. They are also, in essence, the goal of the entire study of Macroeconomics: to develop sound policy.

As previously noted, the AP Macroeconomics material is divided into six chapters. These chapters are then further divided into subchapters which are delineated below.

Basic Economic Concepts (two in-class weeks of study, 5–10% of the test)

• Scarcity
• Opportunity Cost and the Production Possibilities Curve
• Comparative Advantage and Gain From Trade
• Demand
• Supply
• Market Equilibrium, Disequilibrium, and Changes in Equilibrium

Economic Indicators and the Business Cycle (two to three in-class weeks of study; 12–17% of the test)

• The Circular Flow and Gross Domestic Product
• Limitations of GDP
• Unemployment
• Price Indices and Inflation
• Costs of Inflation
• Real v. Nominal GDP
• Business Cycles

National Income and Price Determination (three in-class weeks of study; 17–27% of the test)

• Aggregate Demand
• Multipliers
• Short-Run Aggregate Supply
• Long-Run Aggregate Supply
• Equilibrium in the Aggregate Demand and Aggregate Supply Models
• Changes in the Aggregate Demand and Aggregate Supply Model in the Short-Run
• Long-Run Self-Adjustment
• Fiscal Policy
• Automatic Stabilizers

Financial Sectors (two to three in-class weeks of study; 18–23% of the test)

• Financial Assets
• Nominal v. Real Interest Rates
• Definition, Measurement, and Functions of Money
• Banking and the Expansion of the Money Supply
• The Money Market
• Monetary Policy
• The Loanable Funds Market

Long-Run Consequences of Stabilization Policies (two in-class weeks of study; 20–30% of the test)

• Fiscal and Monetary Policy Actions in the Short Run
• The Phillips Curve
• Money Growth and Inflation
• Government Deficits and the National Debt
• Crowding Out
• Economic Growth
• Public Policy and Economic Growth

Open Economy: International Trade and Finance (one to two weeks of in-class study; 10–13% of the test)

• Balance of Payment Accounts
• Exchange Rates
• The Foreign Exchange Market
• Effects of Changes in Policies and Economic Conditions on the Foreign Market Exchange
• Changes in the Foreign Exchange Market and Net Exports
• Real Interest Rates and International Capital Flows

How to study and get a 5 on the AP Macro Exam

In recent years, as many as 20% of test-takers have been able to score a 5 on the AP Macroeconomics test. How can you best assure that you are one of them?

Well, ideally, AP Macroeconomics is offered as a class at your high school, in which case you will be best served by taking the class, meeting regularly with your teacher and tutors to review material, and following the timeline laid out by your teacher. However, if your school does not offer Macroeconomics or you are forced to study for the test by yourself for other reasons, you might find yourself slightly lost. Hopefully, this guide can be helpful.

If you are studying for the test independently, it is recommended that you begin studying 3–6 months before the date of the test. Since AP Macroeconomics is taught in one semester, you can probably begin to study for the test as late as January of the year you intend to take it. This gives you between four and five months to review the material.

You should begin by following the AP coursework material provided online or in textbooks. You can work at this alongside a willing teacher or paid tutor if the opportunity exists. You can use the information provided earlier, approximately how much time is dedicated to studying the material in class, and approximately what percentage of the test relates to each section of material so you can plan how much attention you should direct to each chapter.

Once you have reviewed the material, you should attempt a practice test. This first practice test should serve as a diagnostic tool for you (this can be particularly useful when approached with an expert teacher or tutor). Use the test to identify your strengths and weaknesses and to develop a plan about which material to revisit and study further.

You should also repeatedly assess your ability to answer long- and short-response questions. These questions make up one-third of your total grade for the test and it would be foolish not to practice them as much as time allows. In particular, make sure you know how to correctly label and draw graphs to represent different economic models. These are highly likely to appear on any long-response question you are given.

Assuming you have practiced and mastered the material, you will be well set up to ace the test come May or June. Make sure you are well-rested and hydrated on the day of the test and try to minimize anxiety as much as possible. The AP Macroeconomic test is incredibly formulaic and does not change much year to Advanced Placement tests. If you have studied and prepared according to this guide, you will be in excellent shape to excel.