macroeconomics essay questions and answers

AP Macroeconomics Practice Tests

The AP Macroeconomics Exam includes 60 multiple-choice questions and 3 free-response questions. See the table below:

If you are a mobile user, click here: Do AP Macroeconomics Practice Questions .

AP Macroeconomics Multiple-Choice Practice Tests

• AP Macroeconomics Practice Test: Pacing Drills
• AP Macroeconomics Practice Test: Basic Macroeconomics Concepts
• AP Macroeconomics Practice Test: Aggregate Demand
• AP Macroeconomics Practice Test: Fiscal Policy
• AP Macroeconomics Practice Test: Deficits, Inflation, Unemployment
• AP Macroeconomics Practice Test 1
• AP Macroeconomics Practice Test 2
• AP Macroeconomics Practice Test 3
• AP Macroeconomics Practice Test 4
• AP Macroeconomics Practice Test 5
• AP Macroeconomics Practice Test: Fundamental Economic Issues
• AP Macroeconomics Practice Test: The National Economic Accounts
• AP Macroeconomics Practice Test: Inflation and Unemployment
• AP Macroeconomics Practice Test: Aggregate Supply and Aggregate Demand
• AP Macroeconomics Practice Test: Keynes' Remedy for the Great Depression
• AP Macroeconomics Practice Test: Money and Banking
• AP Macroeconomics Practice Test: Monetary Policy
• AP Macroeconomics Practice Test: Economic Growth
• AP Macroeconomics Practice Test: International Trade and Exchange
• AP Macroeconomics Practice Test 6
• AP Macroeconomics Practice Test 7
• AP Macroeconomics Practice Test 8
• AP Macroeconomics Practice Test 9
• AP Macroeconomics Practice Test 10
• AP Macroeconomics Practice Test: Fundamentals of Economic Analysis
• AP Macroeconomics Practice Test: Demand, Supply, Market Equilibrium, and Welfare Analysis
• AP Macroeconomics Practice Test: Macroeconomic Measures of Performance
• AP Macroeconomics Practice Test: Consumption, Saving, Investment, and the Multiplier
• AP Macroeconomics Practice Test: Aggregate Demand and Aggregate Supply
• AP Macroeconomics Practice Test: Fiscal Policy, Economic Growth, and Productivity
• AP Macroeconomics Practice Test: Money, Banking, and Monetary Policy
• AP Macroeconomics Practice Test: International Trade
• AP Macroeconomics Practice Test 11
• AP Macroeconomics Practice Test 12
• AP Macroeconomics Practice Test 13
• AP Macroeconomics Practice Test 14
• AP Macroeconomics Practice Test 15
• AP Macroeconomics Practice Test 16
• AP Macroeconomics Practice Test 17
• AP Macroeconomics Practice Test 18
• AP Macroeconomics Practice Test 19
• AP Macroeconomics Practice Test 20
• AP Macroeconomics Practice Test 21
• AP Macroeconomics Practice Test 22
• AP Macroeconomics Practice Test 23
• AP Macroeconomics Practice Test 24
• AP Macroeconomics Practice Test 25
• AP Macroeconomics Practice Test 26
• AP Macroeconomics Practice Test 27
• AP Macroeconomics Practice Test 28

AP Macroeconomics Free-Response Practice Tests

• AP Macroeconomics Free-Response Practie Test 1
• AP Macroeconomics Free-Response Practie Test 2
• AP Macroeconomics Free-Response Practie Test 3
• AP Macroeconomics Free-Response Practie Test 4
• AP Macroeconomics Free-Response Practie Test 5
• AP Macroeconomics Free-Response Practie Test 6
• AP Macroeconomics Free-Response Practice Test 1
• AP Macroeconomics Free-Response Practice Test 2
• AP Macroeconomics Free-Response Practice Test 3
• AP Macroeconomics Free-Response Practice Test 4: The National Economic Accounts
• AP Macroeconomics Free-Response Practice Test 5: Inflation and Unemployment
• AP Macroeconomics Free-Response Practice Test 6: Money and Banking
• AP Macroeconomics Free-Response Practice Test 7: Monetary Theory
• AP Macroeconomics Free-Response Practice Test 8: Aggregate Supply and Aggregate Demand

AP Macroeconomics Flashcards

• AP Macroeconomics Flashcards Set 1
• AP Macroeconomics Flashcards Set 2
• AP Macroeconomics Flashcards Set 3
• AP Macroeconomics Flashcards Set 4
• AP Macroeconomics Flashcards Set 5
• AP Macroeconomics Flashcards Set 6
• AP Macroeconomics Flashcards Set 7
• AP Macroeconomics Flashcards Set 8
• AP Macroeconomics Flashcards Set 9
• AP Macroeconomics Flashcards Set 10
• AP Macroeconomics Flashcards Set 11
• AP Macroeconomics Flashcards Set 12
• AP Macroeconomics Flashcards Set 13
• AP Macroeconomics Flashcards Set 14
• AP Macroeconomics Flashcards Set 15
• AP Macroeconomics Flashcards Set 16
• AP Macroeconomics Flashcards Set 17
• AP Macroeconomics Flashcards Set 18

AP Macroeconomics Downloads

• More AP Macroeconomics Downloads

Tips for writing economics essays

Some tips for writing economics essays  Includes how to answer the question, including right diagrams and evaluation – primarily designed for A Level students.

1. Understand the question

Make sure you understand the essential point of the question. If appropriate, you could try and rephrase the question into a simpler version.

For example:

Q. Examine the macroeconomic implications of a significant fall in UK House prices, combined with a simultaneous loosening of Monetary Policy.

In plain English.

• Discuss the effect of falling house prices on the economy
• Discuss the effect of falling interest rates (loose monetary policy) on economy

In effect, there are two distinct parts to this question. It is a valid response, to deal with each separately, before considering both together.

It helps to keep reminding yourself of the question as you answer. Sometimes candidates start off well, but towards the end forget what the question was. Bear in mind, failure to answer the question can lead to a very low mark.

2. Write in simple sentences

For clarity of thought, it is usually best for students to write short sentences. The main thing is to avoid combining too many ideas into one sentence. If you write in short sentences, it may sound a little stilted; but it is worth remembering that there are no extra marks for a Shakespearian grasp of English. (at least in Economics Exams)

Look at this response to a question:

Q. What is the impact of higher interest rates?

Higher interest rates increase the cost of borrowing. As a result, those with mortgages will have lower disposable income. Also, consumers have less incentive to borrow and spend on credit cards. Therefore consumption will be lower. This fall in consumption will cause a fall in Aggregate Demand and therefore lead to lower economic growth. A fall in AD will also reduce inflation.

I could have combined 1 or 2 sentences together, but here I wanted to show that short sentences can aid clarity of thought. Nothing is wasted in the above example.

Simple sentences help you to focus on one thing at once, which is another important tip.

3. Answer the question

Quite frequently, when marking economic essays, you see a candidate who has a reasonable knowledge of economics, but unfortunately does not answer the question. Therefore, as a result, they can get zero for a question. It may seem harsh, but if you don’t answer the question, the examiner can’t give any marks.

At the end of each paragraph you can ask yourself; how does this paragraph answer the question? If necessary, you can write a one-sentence summary, which directly answers the question. Don’t wait until the end of the essay to realise you have answered a different question.

Discuss the impact of Euro membership on UK fiscal and monetary policy?

Most students will have revised a question on: “The benefits and costs of the Euro. Therefore, as soon as they see the Euro in the title, they put down all their notes on the benefits and costs of the Euro. However, this question is quite specific; it only wishes to know the impact on fiscal and monetary policy.

The “joke” goes, put 10 economists in a room and you will get 11 different answers. Why? you may ask. The nature of economics is that quite often there is no “right” answer. It is important that we always consider other points of view, and discuss various different, potential outcomes. This is what we mean by evaluation.

Macro-evaluation

• Depends on the state of the economy – full capacity or recession?
• Time lags – it may take 18 months for interest rates to have an effect
• Depends on other variables in the economy . Higher investment could be offset by fall in consumer spending.
• The significance of factors . A fall in exports to the US is only a small proportion of UK AD. However, a recession in Europe is more significant because 50% of UK exports go to EU.
• Consider the impact on all macroeconomic objectives . For example, higher interest rates may reduce inflation, but what about economic growth, unemployment, current account and balance of payments?
• Consider both the supply and demand side . For example, expansionary fiscal policy can help to reduce demand-deficient unemployment, however, it will be ineffective in solving demand-side unemployment (e.g. structural unemployment)

Example question :

The effect of raising interest rates will reduce consumer spending.

• However , if confidence is high, higher interest rates may not actually discourage consumer spending.

If the economy is close to full capacity a rise in interest rates may reduce inflation but not reduce growth. (AD falls from AD1 to AD2)

• However , if there is already a slowdown in the economy, rising interest rates may cause a recession. (AD3 to AD3)

Micro-evaluation

1. The impact depends on elasticity of demand

In both diagrams, we place the same tax on the good, causing supply to shift to the left.

• When demand is price inelastic, the tax causes only a small fall in demand.
• If demand is price elastic, the tax causes a bigger percentage fall in demand.

2. Time lag

In the short term, demand for petrol is likely to be price inelastic. However, over time, consumers may find alternatives, e.g. they buy electric cars. In the short-term, investment will not increase capacity, but over time, it may help to increase a firms profitability. Time lags.

3. Depends on market structure

If markets are competitive, then we can expect prices to remain low. However, if a firm has monopoly power, then we can expect higher prices.

4. Depends on business objectives

If a firm is seeking to maximise profits, we can expect prices to rise. However, if a firm is seeking to maximise market share, it may seek to cut prices – even if it means less profit.

5. Behavioural economics

In economics, we usually assume individuals are rational and seeking to maximise their utility. However, in the real world, people are subject to bias and may not meet expectations of classical economic theory. For example, the present-bias suggest consumers will give much higher weighting to present levels of happiness and ignore future costs. This may explain over-consumption of demerit goods and under-consumption of merit goods. See: behavioural economics

Exam tips for economics – Comprehensive e-book guide for just £5

8 thoughts on “Tips for writing economics essays”

I really want to know the difference between discussion questions and analysis questions and how to answer them in a correct way to get good credit in Economics

Analysis just involves one sided answers while Discussion questions involve using two points of view

This is a great lesson learnd by me

how can I actually manage my time

The evaluation points in this article are really useful! The thing I struggle with is analysis and application. I have all the knowledge and I have learnt the evaluation points like J-curve analysis and marshall learner condition, but my chains of reasoning are not good enough. I will try the shorter sentences recommended in this article.

What kind of method for costing analysis is most suitable for a craft brewery, in order to analyze the cost of production of different types of beer_

Really useful!Especially for the CIE exam papers

Does anyone know how to evaluate in those advantages/disadvantages essay questions where you would basically analyse the benefits of something and then evaluate? Struggling because wouldn’t the evaluation just be the disadvantages ?? Like how would you evaluate without just stating the disadvantage?

Leave a comment Cancel reply

AP Macroeconomics Practice Exams

Below you will find links to free AP Macroeconomics practice exams. Hundreds of free practice questions with detailed explanations. Start your exam prep right here!

Official 2012 Practice Test

Practice ap macro questions, khan academy, albert’s ap macroeconomics, varsity tutors, practice test, mankiw textbook quizzes, mcconnell textbook quizzes, flashcard review, exam review, vocabulary quiz.

AP Macroeconomics | Practice Exams | Free Response | Notes | Videos |  Study Guides

Scarcity means human wants for goods and services exceed the available supply. Supply is limited because resources are limited. Demand, however, is virtually unlimited. Whatever the supply, it seems human nature to want more.

100 people / 10 people per ham = a maximum of 10 hams per month if all residents produce ham. Since consumption is limited by production, the maximum number of hams residents could consume per month is 10.

She is very productive at her consulting job, but not very productive growing vegetables. Time spent consulting would produce far more income than it what she could save growing her vegetables using the same amount of time. So on purely economic grounds, it makes more sense for her to maximize her income by applying her labor to what she does best (i.e. specialization of labor).

The engineer is better at computer science than at painting. Thus, his time is better spent working for pay at his job and paying a painter to paint his house. Of course, this assumes he does not paint his house for fun!

There are many physical systems that would work, for example, the study of planets (micro) in the solar system (macro), or solar systems (micro) in the galaxy (macro).

Draw a box outside the original circular flow to represent the foreign country. Draw an arrow from the foreign country to firms, to represents imports. Draw an arrow in the reverse direction representing payments for imports. Draw an arrow from firms to the foreign country to represent exports. Draw an arrow in the reverse direction to represent payments for imports.

There are many such problems. Consider the AIDS epidemic. Why are so few AIDS patients in Africa and Southeast Asia treated with the same drugs that are effective in the United States and Europe? It is because neither those patients nor the countries in which they live have the resources to purchase the same drugs.

Public enterprise means the factors of production (resources and businesses) are owned and operated by the government.

The United States is a large country economically speaking, so it has less need to trade internationally than the other countries mentioned. (This is the same reason that France and Italy have lower ratios than Belgium or Sweden.) One additional reason is that each of the other countries is a member of the European Union, where trade between members occurs without barriers to trade, like tariffs and quotas.

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Economics Revision Essay Plans

Last updated 17 Dec 2019

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This series of resources provides revision essay plans for a wide variety of essay topics, including synoptic questions.

For the 2019 papers check out our collection of videos on building A* evaluation into your answers

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A-Level Economics Model Answers (for Edexcel Past Papers)

Download A-Level Economics Model Answers for Edexcel past papers below for A2 and AS. These candidate responses were extracted from Edexcel exam board’s examiners’ reports and were graded by Edexcel examiners. All new specification Economics papers and their model answers are now available including Paper 1 (Microeconomics), Paper 2 (Macroeconomics) and Paper 3 (Synoptic).

Relevant resources: Download Edexcel A2 Economics past papers for students studying A2 Economics in their second year. Download Edexcel AS Economics past papers for students studying AS Economics in their first year. Visit our Edexcel Economics notes & questions by topic for practicing and revising certain areas of the course.

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Example 15 mark essay in style of IB Economics Paper 1

How should you structure a 15 mark question? 

Because of multiple requests from students, I have created a 15 mark model answer in style of IB Economics paper 1. 

This is based on the new IBDP Economics syllabus.

For 24 model answers to 15 mark paper 1 questions, check out the links below:

For more exam tips for IB Economics HL, check out the links below:

Question for model answer

Here is a practice question I have created:

Using real world examples, evaluate the effectiveness of contractionary monetary policy in reducing inflation (15 marks)

Brief essay plan

Here is a quick plan:

• Point 1: Effect of higher interest rates on consumption, investment and AD and hence inflation.
• Evaluation 1: But this depends on the importance of interest rate decisions for (consumption /) investment decisions.
• Point 2: Effect on exchange rates and net exports 
• Evaluation 2: But depends on what happens to other interest rates around the world e.g. US rising rates.
• Point 3 (optional): Effect of quantitative tightening (opposite of quantitative easing) on investment and AD and hence inflation.
• Evaluation 3 (optional): But this depends on the level of spare capacity.
• Examples: UK interest rate rises / inflation, US interest rate rises, UK quantitative tightening.

Example model answer

Contractionary monetary policy includes raising interest rates and reversing quantitative easing. Interest rates are the cost of borrowing and the reward from saving. Interest rates are currently rising in the UK in response to high inflation.

Higher interest rates are likely to reduce aggregate demand. Interest rates increased from 0.25% to 3% in the UK over 2022. Higher interest rates increase the reward for saving, increasing the incentive to save. So saving increases and consumption falls. Higher interest rates increase the cost of borrowing, so consumers who borrow e.g. with a mortgage face higher bills and so are more likely to cut consumption. As a result of higher borrowing costs, firms are less likely to borrow to invest, which reduces investment. As consumption and investment are components of aggregate demand (AD=C+I+G+X-M), AD falls and shifts left from AD to AD1. There could also be a negative multiplier effect, where a one off fall in AD leads to a further fall in AD and real GDP, as shown by the shift left in AD from AD1 to AD2. This is because, for example, reduced investment means reduced profits for other firms, who cut workers’ wages. Workers then go on to cut their own consumer spending, reducing the incomes for local shop owners and so on. This means real GDP falls from Y to Y2 and there is a decrease in the price level from PL to PL2. This is likely to reduce the rate of inflation.

But this depends on the importance of interest rate changes for consumption and investment decisions. For example most mortgages in the UK are fixed rate mortgages rather than variable rate mortgages, with 82%  of mortgage borrowing on fixed rates in the UK. Those on fixed rate mortgages may face less of an immediate increase in mortgage borrowing costs as interest rates rise, as the rates are likely to have been fixed in advance of the rate rise. Though many fixed rate mortgages may be short term, so these fixed rate mortgages are likely to be renewed with updated rates, with most mortgages expected to be renewed before 2025. While some mortgage holders may be protected in the short run, higher interest rates are likely to have a significant effect through mortgage costs.

A higher interest rate, relative to rates in other economies, leads to a higher rate of return on assets or savings in the UK. This leads to hot money flows into the UK economy. To buy UK assets or to put money in a UK bank, international investors are likely to need to convert currency into pounds. This increases demand for the currency, which shifts right from D to D1 leading to an appreciation of the pound from P to P1. This makes exports more expensive and imports cheaper, reducing export demand and increasing import demand. Provided the Marshall-Lerner condition holds, that the PED of exports and the PED of imports sum to 1 or more, this will result in reduced net exports, leading to lower AD as net exports is a component of AD. This will cause reduced real GDP and reduced employment because demand for workers is derived from demand for goods and services. Employment is most likely to fall particularly in industries that export heavily, such as gold, cars, airplanes, pharmaceuticals and oil – these exports account for nearly 28% of UK exports.

But this depends on what happens to other interest rates around the world. At the same time, we have also seen rising interest rates in the US, as the Federal Reserve central bank also tries to control inflation. This means there may be less of a difference in the US and UK rates of return, reducing the likelihood of significant hot money flows to the UK as a result of higher interest rates. Indeed we have seen increased strength of the US dollar relative to the pound in September 2022, which may have resulted from hot money flows into the US. So higher interest rates in the UK are unlikely to have a significant  positive effect on net exports.

Quantitative tightening is the reverse of quantitative easing. Quantitative tightening means the central bank, for example the Bank of England, sells government bonds  (that it had previously purchased with digitally created money). This increases the supply of government bonds, reducing their price and increasing their quantity. Reducing the bond price raises interest rates on government bonds. Bondholders such as commercial banks now receive a higher return on holding bonds relative to giving out loans. This means banks buy more bonds, leaving reduced cash available for lending, and so commercial banks reduce the supply of loanable funds, reducing the amount of total investment in the economy. This will reduce aggregate demand and hence inflation.The total value of assets under the quantitative easing scheme in the U.K. reached £895 billion. The Bank of England plans to engage in quantitative tightening of about £80 billion in 2023.

But this depends on the position of the economy on the Keynesian LRAS. If the economy has high spare capacity, then the economy is on the horizontal part of the Keynesian LRAS curve. This means a shift left in AD leads to a significant fall in real GDP and little change in inflation. The Bank of England currently judges there is little spare capacity in November 2022 but over the medium term weak demand is likely to mean higher spare capacity. So in the medium term quantitative tightening may have less of an effect on reducing inflation.

Overall contractionary monetary policy is likely to reduce inflation, reduce real GDP and reduce employment. While the direction of the effects is mostly clear, the magnitude is less clear. The most important effect is through the mortgage market, which is likely to be larger in the medium term rather than the short run as consumers renew their fixed mortgages. The effects of contractionary monetary policy also depend on the stance of fiscal policy. If fiscal policy is expansionary, e.g. increased government spending without higher taxes, then this may negate the effect of contractionary monetary policy on inflation. As interest rates rise in the UK, fiscal policy was briefly expansionary with announcements of tax cuts and spending on the energy support scheme, yet the fiscal policy has become less expansionary under Chancellor Jeremy Hunt, with tax rises for example on middle and higher earners announced. This means monetary policy is likely to be more effective in reducing inflation.

This answer features detailed analysis, with use of graphs.

There are real world examples throughout. Here I have mainly focussed on the UK example. But you can tailor your answer to another country.

For data on the UK economy, I recommend two sources: Trading Economics and the Bank of England’s monetary policy reports .

There is also  evaluation and a solid conclusion.

There are also some definitions of key terms where relevant.

This answer would likely score full marks or close to it.

Other questions

How many words / how much time for a 15 mark question in ib economics paper 1.

The word count is somewhat arbitrary – it depends on how succinctly you can express ideas.

Given the time limits in the exam, most top 15 mark answers I observe reach a word count between 700 and 1100 words.. 

I recommend spending 45 minutes on the 15 mark question. I also recommend a quick plan in this time (just so you know the points, evaluation and example(s) you will use.

Note the timing and requirements may be different for questions in papers 2 and 3.

How should I structure a 15 marker for paper 1 IB?

• Introduction
• Point 1 (analysis and example) 
• Evaluation 1 
• Point 2 (analysis and example)
• Evaluation 2
• [Optional: third point and evaluation, depending on length of first two points].

How do you write conclusions in IB Economics?

There are a few key steps for conclusions:

• Pick a side / answer the question!
• Justify your decision.
• Bring in context.
• Bring in  one other evaluative point on which your answer may depend.

What are the most common mistakes to avoid?

• Forgetting application – make sure to revise your real-world examples. Include your real world examples in your plan.
• Forgetting evaluation or not knowing the evaluation points to write . Practise the most common evaluation points. Here for example, spare capacity is a key evaluation point you can use for any AD shift. 
• Analysis issues in particular graph sketching . Practise graphs so that you have the key graphs memorised. This includes supply and demand, cost and benefit, cost and revenue, AS-AD and tariff diagrams. Analysis issues are harder to solve – you have to understand the content well and practise key chains of analysis for each key area of the course.
• Poor conclusion . A poor conclusion may just summarise the arguments already made (adding no value). Alternatively it may not answer the question given. Remember to start with a decision on the question and justify it. I recommend practising using the conclusion framework above.

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