You're sitting there, staring at a blank sheet of paper during a timed FRQ, and suddenly you can't remember if an increase in the money supply shifts the MS curve left or right. It's a nightmare. Honestly, most students fail the AP Macroeconomics exam not because they don't understand the concepts, but because they mess up the visuals. This AP macro graphs cheat sheet is designed to fix that. We're going beyond the basic "up means more" logic. We are looking at the specific triggers that make or break your score when the College Board starts throwing curveballs about "rational expectations" or "crowding out."
Economics is a language of lines. If you can’t speak the lines, you’re basically just guessing.
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The Aggregate Demand and Supply (AD-AS) Powerhouse
This is the big one. It's the "mother" of all macro graphs. If you master this, you’ve already secured a 3. You've got the price level on the vertical axis and Real GDP on the horizontal. Sounds simple, right? But here is where people trip up: they confuse a change in the price level with a shift.
A change in the price level only causes movement along the AD curve. That’s it. If you want to shift that AD curve, you need a change in C, I, G, or (X-n). Think about it. If the government decides to spend $500 billion on new bridges, that is a direct increase in "G." The curve moves right. If people get scared about a recession and stop buying lattes, "C" drops, and the curve moves left.
The Short-Run Aggregate Supply (SRAS) is a different beast entirely. It’s all about costs. Wages, energy prices, and productivity. If oil prices spike—which happens a lot in these exam scenarios—SRAS shifts left. This creates stagflation. It’s the worst-case scenario for an economy: rising prices and falling output. You'll see this on almost every exam.
Long-Run Aggregate Supply (LRAS) is just a vertical line. It represents full employment. It doesn't care about the price level. It only moves if there's a change in the quantity or quality of resources, or a massive technological breakthrough. If the US suddenly discovers a new way to fusion power everything for free, that LRAS is moving right, and it's taking the whole economy with it.
The Money Market vs. Loanable Funds (The Confusion Zone)
This is the most common place to lose points. Seriously. I see it every year. Students use the Money Market graph when they should use Loanable Funds, or vice versa.
The Money Market is about the Nominal Interest Rate. It’s controlled by the Fed (or whatever central bank they mention). The Supply of Money (Sm) is a vertical line because the Fed decides exactly how much money is in circulation. If they buy bonds, the MS shifts right, and nominal interest rates fall. This is "Easy Money" policy.
Loanable Funds is about the Real Interest Rate. It’s where savers (the supply) and borrowers (the demand) meet. If the government runs a budget deficit, they have to borrow money. This increases the demand for loanable funds, which drives up the real interest rate. This leads to "Crowding Out," where private investment (I) decreases because it's too expensive to borrow.
- Money Market: Vertical Supply, Nominal Interest, Fed Policy.
- Loanable Funds: Sloping Supply (from households), Real Interest, Deficits/Savings.
Don't mix them. If the question asks about the "price of borrowing for investment," they want Loanable Funds. If they ask about "liquidity preference," they want the Money Market.
Phillips Curve: The Trade-Off That Isn't Always There
The Phillips Curve shows the relationship between inflation and unemployment. In the short run (SRPC), there's a trade-off. If you want less unemployment, you're gonna have to deal with more inflation. It’s a downward-sloping curve.
But here’s the trick. When the AD curve shifts, you move along the SRPC. If AD shifts right (more growth), you move up and to the left on the SRPC (higher inflation, lower unemployment). However, if the SRAS shifts, the entire SRPC shifts in the opposite direction. If SRAS moves left (stagflation), the SRPC moves right. This is because now you have both higher inflation and higher unemployment. It’s a mess.
The Long-Run Phillips Curve (LRPC) is a vertical line at the Natural Rate of Unemployment (NRU). No matter what the inflation rate is, the economy will eventually return to this level of unemployment. If the government tries to "cheat" by printing money to lower unemployment, it only works temporarily until people adjust their inflationary expectations. Then, you're just back at the NRU but with higher prices.
Foreign Exchange (FOREX) and the Mirror Effect
The FOREX graph is actually the easiest one on this AP macro graphs cheat sheet, but it feels hard because you have to think about two countries at once.
If Americans want to buy more French wine, they need Euros. They "supply" Dollars to the market and "demand" Euros. This makes the Euro appreciate (get stronger) and the Dollar depreciate (get weaker).
It is always a mirror. If one currency is appreciating, the other must be depreciating. Always. You can't have two currencies getting stronger against each other at the same time. When the Dollar gets weaker, US goods become cheaper for foreigners. Our exports go up, our AD shifts right, and the trade balance moves toward a surplus.
The Crowding Out Effect Visualized
Let's get specific about Crowding Out because it shows up in the FRQs almost every single time. It links three different graphs.
First, the government spends more than it takes in (Deficit Spending). To fund this, they go to the Loanable Funds market. The Demand for Loanable Funds (Dl) shifts right. This pulls the Real Interest Rate up.
Now, look at your Investment Demand graph. Since the interest rate is higher, businesses don't want to borrow to build new factories. Investment (I) falls.
Finally, go to your AD-AS graph. Since Investment is a component of AD, the initial "boost" from government spending is partially offset by the "drop" in private investment. The AD doesn't shift as far right as it would have otherwise. It’s a self-defeating move by the government in the long run because less investment today means less capital stock and slower growth (LRAS) tomorrow.
Practical Steps for Graphing Mastery
Knowing the graphs isn't enough; you have to be able to draw them under pressure. Here is how you actually prep for the exam:
1. The "No-Label, No-Credit" Rule
If you draw the most beautiful AD-AS graph in history but forget to label the vertical axis "Price Level" or "PL," you get zero points. Label everything immediately. Do it before you even draw the curves.
2. Shift One Thing at a Time
The College Board usually only expects you to shift one curve per prompt. If you find yourself shifting three different things because "well, then the people will spend less and then the interest rates might..." stop. You’re overthinking. Stick to the primary trigger mentioned in the question.
3. Use Arrows
Always draw an arrow indicating the direction of the shift. It helps the grader, and it helps you keep your logic straight. A simple $\rightarrow$ or $\leftarrow$ can save your score if your lines are a little shaky.
4. Dotted Lines for Equilibrium
When you show a change, use dotted lines to mark the old equilibrium ($P_1, Y_1$) and the new equilibrium ($P_2, Y_2$). This makes the change in price and output crystal clear.
5. The Zero-Bound Problem
In recent years, the Fed's "Ample Reserves" framework has changed how we look at the Money Market. If the exam mentions "Ample Reserves," the Money Supply curve might be horizontal at the bottom (the policy rate). While the traditional vertical MS is still common, be aware of the "administered rates" like the IORB (Interest on Reserve Balances).
Economics isn't just about memorizing definitions. It's about seeing the connections between the "price of money" and the "output of a nation." When you look at these graphs, don't just see lines. See the millions of decisions people make every day when the cost of a loan goes up or the price of bread rises.
Actionable Insights for Exam Day
- Memorize the "shifters" for each graph. C+I+G+Xn for AD; RAP (Resources, Actions of Gov, Productivity) for SRAS.
- Practice drawing the AD-AS, Money Market, and Loanable Funds graphs from memory at least three times a day for a week.
- When a question mentions "Fiscal Policy," think AD and Loanable Funds.
- When a question mentions "Monetary Policy," think Money Market and AD.
- Check your axes twice. Putting "Quantity" instead of "Real GDP" on an AD-AS graph is a common, avoidable mistake.
- Always link the FOREX market back to the Net Export component of AD to show the full cycle of the economic impact.
The graphs are your best friends on this exam. They tell you the answer before you even have to write a single sentence of explanation. If the lines cross at a higher point on the Y-axis, inflation went up. If they cross further to the right on the X-axis, the economy grew. Let the geometry do the heavy lifting for you.