Chapter 14: Long-Run Consequences of Stabilization Policies

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AP Macroeconomics

Unit 5: Long-Run Consequences of Stabilization Policies

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15 Terms

1
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Rational expectations
theory that people learn to anticipate government policies that influence the economy, making the policies ineffective.
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Phillips curve
shows inverse relationship between inflation rate and unemployment.
3
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National debt
total amount of money that the federal government owes.
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Deflation
sustained decrease overall price level.
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Budget deficit
federal government spending- tax collections.
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Monetary inflation
when prices increase due to oversupply of currency.
7
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Inflation
sustained increase to overall price level.
8
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Monetary inflation
when prices increase due to oversupply of currency
9
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Phillips curve
shows inverse relationship between inflation rate and unemployment
10
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Rational expectations
theory that people learn to anticipate government policies that influence the economy, making the policies ineffective
11
New cards
Inflation
sustained increase to overall price level
12
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Deflation
sustained decrease overall price level
13
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National debt
total amount of money that the federal government owes
14
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Ricardian Equivalency theory
deficit financing no different from tax financing
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Crowding out
decrease in real investment due to higher interest rates from government purchases