The biggest unit on the exam, and the engine behind everything else. Aggregate demand and supply, the spending and tax multipliers, short-run equilibrium, long-run self-adjustment, and fiscal policy.
Eight topics from the College Board CED, in order.
Topic 3.1
Aggregate Demand
Why the AD curve slopes downward, and the determinants that shift it left or right.
Topic 3.2
The Multiplier Effect
MPC, MPS, and how the spending and tax multipliers amplify an initial change in spending.
Topic 3.3
Short-Run Aggregate Supply (SRAS)
Why SRAS slopes upward, and the determinants — input costs and expectations — that shift it.
Topic 3.4
Long-Run Aggregate Supply (LRAS)
Why LRAS is vertical at potential (full-employment) GDP, and what shifts it.
Topic 3.5
Equilibrium in the AD/AS Model
Finding short-run equilibrium price level and real GDP where AD meets SRAS.
Topic 3.6
Changes in Short-Run Equilibrium
How shifts in AD or SRAS create recessionary or inflationary gaps relative to potential GDP.
Topic 3.7
Long-Run Self-Adjustment
How wage and price flexibility shifts SRAS over time, returning the economy to potential GDP without policy intervention.
Topic 3.8
Fiscal Policy & Automatic Stabilizers
Expansionary and contractionary fiscal policy, crowding out, and automatic stabilizers like unemployment insurance and progressive taxes.
About Unit 3
Unit 3 is the heart of AP Macroeconomics — the AD/AS model you'll build here is the lens through which the rest of the course interprets the economy. You'll learn how aggregate demand and aggregate supply interact to determine the price level and real GDP, why a change in spending ripples through the economy by more than its initial size (the multiplier), and how the government can use fiscal policy to push the economy toward full employment.
This unit is roughly 17–27% of the AP Macro exam — the single largest unit — and takes about 18–22 class periods. Nearly every FRQ on the real exam involves drawing or reading an AD/AS graph, so fluency with shifting curves correctly is non-negotiable.
The College Board ties Unit 3 to four Big Ideas that recur across the whole course:
Big Idea 1
Markets — AD/AS determines price level and output
Big Idea 2
Multiplier effects — small changes ripple into large ones
Big Idea 3
Self-correction — economies adjust toward potential GDP over time
Big Idea 4
Policy tradeoffs — fiscal tools have both power and limits