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AP Macroeconomics Unit 5 Questions And Answers
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AP Macroeconomics Unit 5 Questions And Answers Contractionary monetary policy REDUCES the money supply. The Fed may decide to take a contractionary approach by INCREASING the interest rates. Indicates a shift in AD to the left to full employment, and reduce inflationary pressures Cost Push ...

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  • October 13, 2024
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  • 2024/2025
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AP Macroeconomics Unit 5 Questions And
Answers

Contractionary monetary policy REDUCES the money supply. The Fed may decide to

take a contractionary approach by INCREASING the interest rates. Indicates a shift in AD to the

left to full employment, and reduce inflationary pressures




Cost Push Inflation increases in the price level (inflation)resulting from an increase in

resource costs (for example, raw material prices) and hence in per unit production costs; inflation

caused by reductions in aggregate supply




Crowding out effect the offset in aggregate demand that results when expansionary fiscal

policy raises the interest rate and thereby reduces investment spending




Debt Deflation the reduction in aggregate demand arising from the increase in the real

burden of outstanding debt caused by deflation




Debt GDP Ratio is the ratio between a country's government debt and its gross domestic

product (GDP)

, AP Macroeconomics Unit 5 Questions And
Answers
Demand pull inflation is asserted to arise when aggregate demand in an economy outpaces

aggregate supply.




ex) Economists will often say that demand-pull inflation is a result of too many dollars chasing

too few goods.




Discretionary Monetary Policy deliberate changed in any of the Fed tools to create

counter cyclical pressures to encourage expansion or dampen inflation




ex)

the use of changes in the interest rate or the money supply to stabilize the economy




Disinflation vs. Deflation Disinflation is an inflation rate that is decreasing but still >0.

Deflation is a negative inflation rate




ex) A slowing in the rate of price inflation

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