AP Macro Unit 5 Review: Long-Run Consequences of Stabilization Policies
AP Macro Unit 5 covers how fiscal and monetary policy play out over time: the Phillips curve, money growth and inflation, deficits and debt, crowding out, and economic growth. At 20–30% it carries the largest weight range on the exam and ties every earlier model together.
What's in Unit 5
- 1Fiscal and monetary policy actions in the short run
- 2The Phillips curve (short-run and long-run)
- 3Money growth and inflation (quantity theory)
- 4Government deficits and the national debt
- 5Crowding out
- 6Economic growth and productivity
- 7Public policy and economic growth
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Long-run growth, productivity, and expanding the PPC.
Full lesson, practice questions & flashcards →Government spending, taxation, multipliers, and budget deficits.
Full lesson, practice questions & flashcards →The Federal Reserve, interest rates, and money supply tools.
Full lesson, practice questions & flashcards →What to master for the exam
- Map AD-AS to the Phillips curve: an AD shift moves you along the SRPC; an SRAS shift moves the SRPC itself.
- Draw crowding out: deficits raise demand for loanable funds → real rate rises → private investment falls.
- Know the long-run: money growth raises inflation, not output; the LR Phillips curve is vertical at the natural rate.
- Tie growth to its sources: more capital (physical and human), more labor, and better technology shift LRAS right.
AP Macro Unit 5: common questions
What is on AP Macro Unit 5?
The combined effects of fiscal and monetary policy, the short-run and long-run Phillips curves, the quantity theory of money, government deficits, the national debt, crowding out, and the determinants of long-run economic growth. Its 20–30% weight range is the largest on the AP Macro exam.
What is crowding out in AP Macro?
When the government runs a deficit, it borrows in the loanable funds market, increasing the demand for loanable funds and raising the real interest rate. The higher rate reduces private investment (and interest-sensitive consumption) — the deficit 'crowds out' private spending, weakening the long-run capital stock.