AP Macroeconomics Unit 5: Long–Run Consequences of Stabilization

Phillips Curve

A curve that shows the trade-off between inflation and unemployment.

Budget Deficit

When annual government spending and transfer payments exceed tax revenue.

Budget Surplus

When annual government spending and transfer payments are less than tax revenue.

National Debt

The accumulation of all budget deficits over time.

Crowding Out

The phenomenon where government deficit spending leads to higher real interest rates and less private investment.

Real GDP per Capita

Real GDP divided by the population, used to measure economic growth and standard of living.

Quantity Theory of Money

The economic theory that M x V = P x Y, where M is money supply, V is velocity, P is price level, and Y is quantity of output.

Expansionary Policy

A policy aimed at increasing output in the short run, often supported by numerous economists.

Supply-Side Fiscal Policy

Policies designed to increase production by reducing business taxes and/or regulations.

Entitlements

Federal programs that require payments to eligible individuals or governments, such as Social Security.