Free-Response Question

1. Question

   Economic growth can be illustrated using macroeconomic models.

   
   

   
   

   1. Draw a correctly labeled production possibilities curve for an economy producing capital goods and consumer goods. Use your graph to illustrate economic growth.

      
      
   
   

   2. Draw a correctly labeled aggregate supply and demand graph showing an economy in long-run equilibrium. On your graph, illustrate economic growth. (6 points)

      
      
   
   

   Rubric for FRQ (6 points)

   1 point: A production possibilities curve graph with “Quantity of capital goods” and “Quantity of consumer goods” labels on the axes

   1 point: The PPC is downward-sloping.

   1 point: Economic growth is indicated by a rightward shift of the PPC.

   1 point: An AS-AD graph with “Aggregate price level” or “PL” on the vertical axis, “Real GDP” on the horizontal axis, a downward-sloping AD curve, and an upward-sloping SRAS curve

   1 point: LRAS is vertical and crosses SRAS and AD , where they intersect.

   1 point: Economic growth is indicated by a rightward shift of the LRAS curve.