# AP Macroeconomics: The AD-AS Model Appears on Every Single Exam
AP Macroeconomics has a 5-rate of about 16-19%. Like AP Micro, it's graph-heavy and predictable. The Aggregate Demand–Aggregate Supply (AD-AS) model is the centerpiece — it appears on the FRQ section of virtually every exam.
Exam Structure
2 hours 10 minutes: 60 MCQs (70 min) and 3 FRQs (60 min). One FRQ is almost always an AD-AS graph question. Another typically involves the money market or loanable funds market.
The 4 Graphs You Must Master
**1. AD-AS Model**: Aggregate Demand slopes downward, Short-Run AS slopes upward, Long-Run AS is vertical at full-employment output (Yf). Know how to show: demand-pull inflation (AD shifts right), cost-push inflation (SRAS shifts left), recession (AD shifts left), and self-correction (SRAS adjusts in long run).
**2. Money Market**: Money supply is vertical (set by the Fed), money demand slopes downward. When the Fed buys bonds → MS shifts right → interest rate falls → investment rises → AD shifts right. This is the monetary policy transmission mechanism.
**3. Loanable Funds Market**: Supply of loanable funds (savings) and demand (investment). Government borrowing shifts demand right → crowding out. Know the difference between this and the money market.
**4. Phillips Curve**: Short-run shows inverse relationship between inflation and unemployment. Long-run is vertical at the natural rate of unemployment. Know how expectations shift the short-run curve.
The Policy Chain
Every macro FRQ follows a chain: **Problem → Policy → Market Effect → Macro Outcome**.
Example: Recession (high unemployment) → Fed buys bonds (expansionary monetary policy) → money supply increases → interest rate falls → investment increases → AD shifts right → output increases, unemployment falls, price level rises.
You must trace this entire chain on the FRQ. Missing any link costs points.
Fiscal vs. Monetary Policy
Know the key differences:
**Drill**: Draw the AD-AS model showing a recessionary gap. Then show: (a) fiscal policy correction, (b) monetary policy correction, (c) self-correction with no policy. Label everything. Time: 10 minutes.
Take the free AP Macroeconomics diagnostic at quantumlearningmachines.com/free-diagnostic?exam=ap-macro — 15 minutes, no signup.