AP Macroeconomics Core Exam
2026/2027 Edition
──────────────────────────────────────────────────
A Comprehensive Assessment of Macroeconomic Principles,
Policy Analysis, and International Finance
Prepared by the AP Macroeconomics Curriculum Development Board
,Abstract
This document presents the AP Macroeconomics Core Examination for the 2026/2027 academic
year, designed as a comprehensive assessment instrument aligned with the College Board's
Advanced Placement Macroeconomics course framework. The examination comprises two
sections: Section I contains 60 multiple-choice questions distributed across eight content
domains—Basic Economic Concepts, Economic Indicators and the Business Cycle, the Financial
Sector, Long-Run Consequences of Stabilization Policies, Open Economy International Trade and
Finance, Aggregate Demand and Aggregate Supply, Stabilization Policies, and Scenario-Based
Application Integrating Macroeconomic Models. Section II features three free-response questions
requiring graphing, calculation, policy analysis, and written explanation. Each question is
accompanied by a detailed rationale and, for free-response items, a complete scoring rubric and
sample response. This examination is intended to evaluate students' mastery of macroeconomic
theory, their ability to apply models to real-world scenarios, and their proficiency in interpreting
economic data and policy outcomes.
Keywords: AP Macroeconomics; Aggregate Demand and Supply; Monetary Policy; Fiscal
Policy; International Finance; Business Cycle
Table of Contents
1. Abstract
2. Table of Contents
3. Section I: Multiple-Choice Questions
3.1 Domain 1: Basic Economic Concepts (Questions 1–8)
3.2 Domain 2: Economic Indicators & the Business Cycle (Questions 9–16)
3.3 Domain 3: The Financial Sector (Questions 17–24)
3.4 Domain 4: Long-Run Consequences of Stabilization Policies (Questions 25–31)
3.5 Domain 5: Open Economy: International Trade & Finance (Questions 32–38)
3.6 Domain 6: Aggregate Demand & Aggregate Supply (Questions 39–46)
3.7 Domain 7: Stabilization Policies (Questions 47–54)
3.8 Domain 8: Scenario-Based Application Integrating Macroeconomic Models (Questions 55–
60)
4. Section II: Free-Response Questions
4.1 FRQ 1: Long FRQ — Aggregate Demand and Supply with Graphing, Calculation, and
Explanation
4.2 FRQ 2: Short FRQ — Policy Analysis
4.3 FRQ 3: Short FRQ — Open Economy Application
5. Answer Key with Rationales
6. References
,Section I: Multiple-Choice Questions
Instructions: Select the best answer for each question. Each question is worth one point. There is
no penalty for guessing.
Domain 1: Basic Economic Concepts
1. Which of the following best illustrates the concept of opportunity cost?
A) A government prints additional currency to fund a deficit
B) A student who chooses to attend college full-time forgoes the income she
could have earned working full-time
C) A firm experiences diminishing marginal returns as it hires more workers
D) A consumer purchases a luxury good on credit
E) An economy achieves full employment of all resources
Rationale: Opportunity cost is defined as the value of the next best alternative foregone
when a choice is made. By attending college full-time, the student gives up potential
earnings from full-time employment, which represents the opportunity cost of that
decision. The other options describe different economic concepts such as inflation,
diminishing returns, debt financing, and macroeconomic equilibrium.
2. The production possibilities curve (PPC) will shift outward if which of the
following occurs?
A) The unemployment rate increases
B) A natural disaster destroys capital stock
C) Technological improvement increases labor productivity
D) The government runs a budget deficit
E) Consumer preferences shift toward leisure goods
Rationale: An outward shift of the PPC indicates economic growth, which occurs when an
economy's productive capacity expands. Technological improvement that increases labor
productivity allows more output to be produced with the same resources, shifting the PPC
outward. Increases in unemployment move the economy inside the PPC rather than
shifting it, while destruction of capital stock shifts it inward.
3. A country has a comparative advantage in producing a good when it
A) can produce more of the good than any other country
B) can produce the good at a lower opportunity cost than another country
C) uses fewer resources to produce the good than another country
D) has an absolute advantage in producing that good
E) subsidizes the production of that good
Rationale: Comparative advantage refers to the ability to produce a good at a lower
opportunity cost than another country, not necessarily at a greater absolute quantity. This
principle, first articulated by David Ricardo, is the foundation for why nations trade and
benefit from specialization even when one country has an absolute advantage in all goods.
4. Which of the following is true regarding the difference between positive and
normative economic statements?
A) Positive statements are based on value judgments; normative statements are factual
B) Positive statements describe what is; normative statements describe what
ought to be
C) Normative statements can be tested empirically; positive statements cannot
D) There is no meaningful difference between positive and normative statements
E) Normative statements are always more accurate than positive statements
Rationale: Positive economics deals with objective, testable statements about how the
economy functions (what is), while normative economics involves subjective value
judgments about how the economy should function (what ought to be). For example,
'Unemployment is 5%' is positive; 'Unemployment should be lower' is normative. Only
positive statements can be empirically verified.
, 5. Assume Country A can produce either 10 units of cloth or 5 units of wine, and
Country B can produce either 6 units of cloth or 6 units of wine. Which of the
following is true?
A) Country A has a comparative advantage in wine
B) Country B has a comparative advantage in cloth
C) Country A has a comparative advantage in cloth
D) Neither country can benefit from trade
E) Country A has an absolute advantage in both goods but a comparative advantage in wine
Rationale: Country A's opportunity cost of 1 unit of cloth is 0.5 units of wine (5/10), while
Country B's opportunity cost of 1 unit of cloth is 1 unit of wine (6/6). Since Country A gives
up less wine per unit of cloth, it has a comparative advantage in cloth. Conversely, Country
B has a comparative advantage in wine. Both countries can benefit from trade by
specializing according to comparative advantage.
6. The law of increasing opportunity cost explains why the production possibilities
curve is
A) a straight line
B) concave to the origin (bowed outward)
C) convex to the origin (bowed inward)
D) a vertical line
E) a horizontal line
Rationale: The law of increasing opportunity cost states that as production of a good
increases, the opportunity cost of producing an additional unit rises because resources are
not perfectly adaptable to the production of all goods. This results in a PPC that is concave
(bowed outward) from the origin. A straight-line PPC would imply constant opportunity
costs, which occurs only when resources are perfectly substitutable.
7. Which of the following would cause a movement along a given production
possibilities curve rather than a shift of the curve?
A) An increase in the labor force
B) An improvement in technology
C) A reallocation of resources from consumer goods to capital goods
D) An increase in capital stock
E) A decrease in the population due to emigration
Rationale: A movement along the PPC occurs when resources are reallocated between the
production of two goods, keeping the economy on the same curve. Reallocating resources
from consumer goods to capital goods represents such a movement. The other options—
changes in labor force, technology, capital stock, or population—change the economy's
productive capacity and would shift the entire PPC.
8. If an economy is operating at a point inside its production possibilities curve, this
indicates that
A) the economy is experiencing inflation
B) resources are not being fully or efficiently employed
C) the economy is producing beyond its capacity
D) the PPC has shifted inward
E) the economy has achieved productive efficiency
Rationale: A point inside the PPC represents inefficiency or unemployment—some
resources are idle or not being used in their most productive capacity. Points on the curve
represent full and efficient employment of resources, while points outside the curve are
unattainable with current resources and technology. Inflation is a price-level phenomenon
and is not directly shown by the PPC.
2026/2027 Edition
──────────────────────────────────────────────────
A Comprehensive Assessment of Macroeconomic Principles,
Policy Analysis, and International Finance
Prepared by the AP Macroeconomics Curriculum Development Board
,Abstract
This document presents the AP Macroeconomics Core Examination for the 2026/2027 academic
year, designed as a comprehensive assessment instrument aligned with the College Board's
Advanced Placement Macroeconomics course framework. The examination comprises two
sections: Section I contains 60 multiple-choice questions distributed across eight content
domains—Basic Economic Concepts, Economic Indicators and the Business Cycle, the Financial
Sector, Long-Run Consequences of Stabilization Policies, Open Economy International Trade and
Finance, Aggregate Demand and Aggregate Supply, Stabilization Policies, and Scenario-Based
Application Integrating Macroeconomic Models. Section II features three free-response questions
requiring graphing, calculation, policy analysis, and written explanation. Each question is
accompanied by a detailed rationale and, for free-response items, a complete scoring rubric and
sample response. This examination is intended to evaluate students' mastery of macroeconomic
theory, their ability to apply models to real-world scenarios, and their proficiency in interpreting
economic data and policy outcomes.
Keywords: AP Macroeconomics; Aggregate Demand and Supply; Monetary Policy; Fiscal
Policy; International Finance; Business Cycle
Table of Contents
1. Abstract
2. Table of Contents
3. Section I: Multiple-Choice Questions
3.1 Domain 1: Basic Economic Concepts (Questions 1–8)
3.2 Domain 2: Economic Indicators & the Business Cycle (Questions 9–16)
3.3 Domain 3: The Financial Sector (Questions 17–24)
3.4 Domain 4: Long-Run Consequences of Stabilization Policies (Questions 25–31)
3.5 Domain 5: Open Economy: International Trade & Finance (Questions 32–38)
3.6 Domain 6: Aggregate Demand & Aggregate Supply (Questions 39–46)
3.7 Domain 7: Stabilization Policies (Questions 47–54)
3.8 Domain 8: Scenario-Based Application Integrating Macroeconomic Models (Questions 55–
60)
4. Section II: Free-Response Questions
4.1 FRQ 1: Long FRQ — Aggregate Demand and Supply with Graphing, Calculation, and
Explanation
4.2 FRQ 2: Short FRQ — Policy Analysis
4.3 FRQ 3: Short FRQ — Open Economy Application
5. Answer Key with Rationales
6. References
,Section I: Multiple-Choice Questions
Instructions: Select the best answer for each question. Each question is worth one point. There is
no penalty for guessing.
Domain 1: Basic Economic Concepts
1. Which of the following best illustrates the concept of opportunity cost?
A) A government prints additional currency to fund a deficit
B) A student who chooses to attend college full-time forgoes the income she
could have earned working full-time
C) A firm experiences diminishing marginal returns as it hires more workers
D) A consumer purchases a luxury good on credit
E) An economy achieves full employment of all resources
Rationale: Opportunity cost is defined as the value of the next best alternative foregone
when a choice is made. By attending college full-time, the student gives up potential
earnings from full-time employment, which represents the opportunity cost of that
decision. The other options describe different economic concepts such as inflation,
diminishing returns, debt financing, and macroeconomic equilibrium.
2. The production possibilities curve (PPC) will shift outward if which of the
following occurs?
A) The unemployment rate increases
B) A natural disaster destroys capital stock
C) Technological improvement increases labor productivity
D) The government runs a budget deficit
E) Consumer preferences shift toward leisure goods
Rationale: An outward shift of the PPC indicates economic growth, which occurs when an
economy's productive capacity expands. Technological improvement that increases labor
productivity allows more output to be produced with the same resources, shifting the PPC
outward. Increases in unemployment move the economy inside the PPC rather than
shifting it, while destruction of capital stock shifts it inward.
3. A country has a comparative advantage in producing a good when it
A) can produce more of the good than any other country
B) can produce the good at a lower opportunity cost than another country
C) uses fewer resources to produce the good than another country
D) has an absolute advantage in producing that good
E) subsidizes the production of that good
Rationale: Comparative advantage refers to the ability to produce a good at a lower
opportunity cost than another country, not necessarily at a greater absolute quantity. This
principle, first articulated by David Ricardo, is the foundation for why nations trade and
benefit from specialization even when one country has an absolute advantage in all goods.
4. Which of the following is true regarding the difference between positive and
normative economic statements?
A) Positive statements are based on value judgments; normative statements are factual
B) Positive statements describe what is; normative statements describe what
ought to be
C) Normative statements can be tested empirically; positive statements cannot
D) There is no meaningful difference between positive and normative statements
E) Normative statements are always more accurate than positive statements
Rationale: Positive economics deals with objective, testable statements about how the
economy functions (what is), while normative economics involves subjective value
judgments about how the economy should function (what ought to be). For example,
'Unemployment is 5%' is positive; 'Unemployment should be lower' is normative. Only
positive statements can be empirically verified.
, 5. Assume Country A can produce either 10 units of cloth or 5 units of wine, and
Country B can produce either 6 units of cloth or 6 units of wine. Which of the
following is true?
A) Country A has a comparative advantage in wine
B) Country B has a comparative advantage in cloth
C) Country A has a comparative advantage in cloth
D) Neither country can benefit from trade
E) Country A has an absolute advantage in both goods but a comparative advantage in wine
Rationale: Country A's opportunity cost of 1 unit of cloth is 0.5 units of wine (5/10), while
Country B's opportunity cost of 1 unit of cloth is 1 unit of wine (6/6). Since Country A gives
up less wine per unit of cloth, it has a comparative advantage in cloth. Conversely, Country
B has a comparative advantage in wine. Both countries can benefit from trade by
specializing according to comparative advantage.
6. The law of increasing opportunity cost explains why the production possibilities
curve is
A) a straight line
B) concave to the origin (bowed outward)
C) convex to the origin (bowed inward)
D) a vertical line
E) a horizontal line
Rationale: The law of increasing opportunity cost states that as production of a good
increases, the opportunity cost of producing an additional unit rises because resources are
not perfectly adaptable to the production of all goods. This results in a PPC that is concave
(bowed outward) from the origin. A straight-line PPC would imply constant opportunity
costs, which occurs only when resources are perfectly substitutable.
7. Which of the following would cause a movement along a given production
possibilities curve rather than a shift of the curve?
A) An increase in the labor force
B) An improvement in technology
C) A reallocation of resources from consumer goods to capital goods
D) An increase in capital stock
E) A decrease in the population due to emigration
Rationale: A movement along the PPC occurs when resources are reallocated between the
production of two goods, keeping the economy on the same curve. Reallocating resources
from consumer goods to capital goods represents such a movement. The other options—
changes in labor force, technology, capital stock, or population—change the economy's
productive capacity and would shift the entire PPC.
8. If an economy is operating at a point inside its production possibilities curve, this
indicates that
A) the economy is experiencing inflation
B) resources are not being fully or efficiently employed
C) the economy is producing beyond its capacity
D) the PPC has shifted inward
E) the economy has achieved productive efficiency
Rationale: A point inside the PPC represents inefficiency or unemployment—some
resources are idle or not being used in their most productive capacity. Points on the curve
represent full and efficient employment of resources, while points outside the curve are
unattainable with current resources and technology. Inflation is a price-level phenomenon
and is not directly shown by the PPC.
