FRQ 1 – Long

Overview

• FRQ 1 is the long free-response question worth 10 points
• You have approximately 25 minutes to complete it (out of 60 total FRQ minutes)
• Makes up 16.675% of your total exam score (half of the 33.35% FRQ section)
• Typically has 6-8 parts labeled (a) through (f) or (g)
• Calculator permitted - use it for any calculations

This question integrates multiple units and concepts, testing your ability to connect different areas of macroeconomics. Common topics include: short-run and long-run equilibrium analysis, monetary and fiscal policy effects, international impacts on currency and trade, and self-adjustment mechanisms. You'll almost always need to draw at least one graph, often two or three.

The 10 points are distributed across the parts, with graph drawing typically worth 2-3 points, explanations worth 3-4 points, and specific identifications or calculations worth 1-2 points each. Every point is binary - you either earn it completely or not at all. No partial credit exists, which means precision matters more than lengthy explanations.

Strategy Deep Dive

The long FRQ tests synthesis - your ability to trace policy changes through multiple markets and time periods. Success requires systematic thinking, not just knowledge of individual concepts.

Understanding the Narrative Structure

Every long FRQ tells an economic story. Part (a) establishes the initial situation - perhaps an economy in a recessionary gap or experiencing inflation. Subsequent parts introduce changes: policy interventions, external shocks, or natural adjustments. Your job is to trace these changes through their full economic impact.

Start by identifying the starting position. Is the economy at full employment? Above? Below? This determines everything that follows. If they say unemployment is 5% and natural rate is 6%, you're in an inflationary gap. This means output exceeds potential, putting upward pressure on wages and prices. Lock this starting point in your mind - many students lose points by forgetting the initial conditions halfway through the question.

Next, identify the sequence of changes. Modern FRQs love testing policy responses and their consequences. If part (c) introduces contractionary monetary policy, you must trace it through: higher administered rates → decreased investment and consumption → leftward AD shift → lower output and price level → effects on unemployment → potential currency impacts. Each arrow represents a potential question part.

Graph Drawing Mastery

Graphs earn the most points and cause the most anxiety. But they follow rigid conventions that, once mastered, make them mechanical rather than creative exercises.

For AD-AS graphs, always include: correctly labeled axes (Real GDP or Output on horizontal, Price Level on vertical), all three curves (AD, SRAS, LRAS) with proper shapes, equilibrium points clearly marked, and full employment output labeled. When showing changes, draw the shift clearly and mark the new equilibrium. Use subscripts ($Y_1$, $Y_2$, $PL_1$, $PL_2$) to show the progression.

Common graph errors that cost points: forgetting to label axes (automatic zero), drawing LRAS as anything other than vertical, showing incorrect curve shifts for the given change, or failing to mark equilibrium points clearly. The graders follow a strict checklist - missing any element means losing that point.

For supplementary graphs (money market, loanable funds, foreign exchange), the same principles apply. Label everything, show equilibrium clearly, and show changes with proper shifts. These graphs often connect - interest rate changes in the money market affect exchange rates in the forex market. Understanding these connections lets you check your work for consistency.

The Explanation Formula

When questions ask you to "explain," they want economic reasoning, not just assertions. Develop a formula: State the direction of change → Identify the economic mechanism → Connect to the outcome.

For example: "Explain how expansionary fiscal policy affects interest rates." Strong answer: "Interest rates increase. When government increases spending, it must borrow funds, increasing the demand for loanable funds. With supply unchanged, this increased demand drives up the equilibrium interest rate." Weak answer: "Interest rates go up because of crowding out."

The strong answer shows the causal chain. The weak answer, while not wrong, doesn't show understanding of the mechanism. In binary scoring, the weak answer might not earn the point because it doesn't show sufficient economic reasoning.

Navigating Multi-Market Questions

Recent exams love questions that span multiple markets. A typical sequence: monetary policy affects interest rates (money market) → interest rates affect investment (loanable funds market) → investment affects AD (goods market) → all of this affects currency values (foreign exchange market).

Success requires keeping these markets mentally organized. When interest rates rise in one market, they must rise consistently in related markets. If you show rates rising in the money market but falling in loanable funds, you've made a logical error that graders will catch.

Practice drawing these markets side-by-side during your preparation. Understand which variables appear in multiple markets and must move together. Interest rates appear in money, loanable funds, and foreign exchange markets. Price level appears in AD-AS and money demand. These connections are where students lose points through inconsistency.

Rubric Breakdown

Understanding how points are awarded transforms your approach. Here's how the typical 10 points distribute across common task types:

Graph Drawing (2-3 points typically)

Each graph usually awards 1 point for correct setup (labeled axes, appropriate curves) and 1-2 points for showing changes correctly.

Point for correct setup requires:

• Axes labeled with correct variables
• Curves with correct shapes and labels
• Initial equilibrium clearly marked
• Any specific features mentioned (like full employment output)

Points for showing changes require:

• Correct curve shifting (direction and curve selection)
• New equilibrium clearly marked
• Directional changes indicated if asked

The rubric is unforgiving. "Mostly correct" graphs earn zero points. If you label the vertical axis "P" instead of "Price Level," you might lose the point. Practice precise labeling until it's automatic.

Explanations (3-4 points typically)

Explanation points require demonstrating causal reasoning. The rubric looks for:

• Correct identification of what changes
• Economic reasoning for why it changes
• Connection to the specific scenario given

Common explanation topics:

• How policies transmit through the economy
• Self-adjustment mechanisms
• International transmission effects
• Crowding out or multiplier processes

Avoid circular reasoning. "AD increases because spending increases" doesn't explain anything. "AD increases because lower interest rates make borrowing cheaper, encouraging firms to invest in capital equipment" shows understanding.

Specific Identifications (1-2 points typically)

These points seem easy but require precision:

• "Identify one monetary policy action" - must be something the central bank actually controls
• "State what happens to unemployment" - must specify increase, decrease, or no change
• "Calculate the maximum change in money supply" - must show work and get exact answer

Read carefully. If they ask for "one" policy action and you list two, you might lose the point. If they ask what happens to "real interest rates" and you discuss nominal rates, no point.

Calculation Points (1-2 points typically)

When calculations appear, they test standard formulas:

• Money multiplier = 1/RR
• Spending multiplier = 1/(1-MPC) or 1/MPS
• Real values using price indices
• Percentage changes

Show all work. Even if your final answer is correct, missing work means no point. Write the formula, substitute values, and calculate. Use your calculator to verify, but show the steps.

Common Long FRQ Patterns

While each exam is unique, certain frameworks appear repeatedly:

The Policy Response Framework

Setup: Economy faces some problem (recession, inflation, etc.) Development: Government/Fed put in places policy response
Analysis: Trace short-run effects through various markets Conclusion: Consider long-run implications or international effects

This framework tests whether you understand policy transmission mechanisms. Master the chains: Monetary policy → interest rates → investment → AD → output/price level → employment. Fiscal policy → AD directly but also → interest rates → investment (crowding out).

The International Transmission Framework

Setup: Domestic policy change or economic shock Development: Effects on interest rates or income Analysis: Impact on capital flows and currency values Conclusion: Effects on net exports and return impact on AD

Currency questions always follow logic: Higher interest rates → capital inflows → currency appreciation → exports less competitive → net exports fall. This chain is so fundamental that breaking any link guarantees lost points.

The Long-Run Adjustment Framework

Setup: Economy away from full employment Development: Short-run effects of shocks or policies Analysis: How economy self-adjusts over time Conclusion: Comparison of short-run versus long-run outcomes

Remember: In the long run, economy returns to full employment through price/wage adjustments. If above full employment, wages rise, SRAS shifts left. If below, wages eventually fall (though this is slower), SRAS shifts right. Policies might speed or slow this adjustment but can't prevent it.

The Comparative Framework

Setup: Initial equilibrium described Development: Multiple changes introduced (e.g., both fiscal and monetary policy) Analysis: Trace each change separately then combine effects Conclusion: Determine net impact on key variables

When multiple changes occur, analyze separately first. If government spending increases (rightward AD shift) while Fed raises rates (leftward AD shift), the net effect on AD is ambiguous. But you can still determine definite effects on composition of output (more G, less I) and interest rates (definitely higher).

Time Management Reality

Twenty-five minutes seems generous until you're drawing multiple graphs and explaining complex chains of reasoning. Effective time allocation makes the difference between rushed final parts and thoughtful completion.

Minutes 0-3: Read and plan. Identify all required graphs. List the sequence of changes you'll need to trace. This investment prevents false starts and forgotten components later.

Minutes 3-8: Complete part (a), usually drawing the initial graph. Take time to label everything correctly. A rushed graph with missing labels is worthless. Better to spend an extra minute ensuring accuracy than losing 2-3 points for sloppiness.

Minutes 8-18: Work through the middle parts methodically. These often build on each other - if part (b) asks about interest rates and part (c) about investment, they're connected. Use this structure to check your answers for consistency.

Minutes 18-23: Complete final parts, often involving international effects or long-run analysis. These parts frequently reference earlier answers, so consistency matters. If you said interest rates rise in part (b), they better still be higher when analyzing currency in part (e).

Minutes 23-25: Review for completeness. Check graph labels, ensure all parts attempted, verify calculations. Many students lose points not for wrong answers but for missing components - forgetting to label an axis or show their work on calculations.

Graph Drawing Precision

Let me be extremely specific about graph requirements because this is where most points are lost:

AD-AS Graph Checklist

• Horizontal axis: "Real GDP" or "Output" or "Y" (not just "Q")
• Vertical axis: "Price Level" or "PL" (not "P" for price)
• AD curve: Downward sloping, labeled "AD"
• SRAS curve: Upward sloping, labeled "SRAS"
• LRAS curve: Vertical line, labeled "LRAS"
• Equilibrium: Clear intersection point of AD and SRAS
• Labels: $Y_1$ and $PL_1$ at initial equilibrium
• Full employment: $Y_f$ or $Y_{FE}$ at LRAS position

Money Market Graph Checklist

• Horizontal axis: "Quantity of Money" (not "M")
• Vertical axis: "Nominal Interest Rate" or "NIR" (specify nominal)
• Money supply: Vertical line, labeled "MS"
• Money demand: Downward sloping, labeled "MD"
• Equilibrium: Clear intersection with interest rate labeled

Foreign Exchange Graph Checklist

• Horizontal axis: "Quantity of [Currency]"
• Vertical axis: "Exchange Rate" or "[Currency]/[Other Currency]"
• Supply curve: Upward sloping (more supplied at higher price)
• Demand curve: Downward sloping
• Equilibrium: Clear exchange rate value

Common disasters: Drawing supply and demand as straight lines (they should curve), forgetting currency names on forex graphs, using "r" for interest rate without specifying real or nominal, drawing LRAS as anything but perfectly vertical.

Final Thoughts

The long FRQ rewards systematic thinking over memorization. Every part connects to create a coherent economic narrative. Success comes from understanding these connections, not treating each part in isolation.

Practice drawing graphs until they're automatic. The mechanical aspects should require no thought during the exam, freeing your mind for economic reasoning. Build templates for common graphs and practice labeling until precision becomes habit.

Most importantly, think like an economist. When policies change, trace their full impact through all affected markets. When drawing graphs, show what actually changes, not what you think should happen in an ideal world. The exam tests economic analysis, not economic philosophy.

Remember that graders want to give you points. They're looking for reasons to award credit, not deduct it. But the binary nature of scoring means you must hit specific targets. Precise graph labeling, clear causal explanations, and systematic analysis earn full credit. Vague assertions and rushed graphs earn zeros.

Master the connections between markets, practice precise communication, and approach each question as an integrated whole rather than isolated parts. This synthesis is what separates adequate performance from excellence on the long FRQ.