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AP Macro: Short Run to Long Run

Suppose the aggregate demand shifts from AD to AD1. Assuming that no monetary or fiscal policy is undertaken, how will the economy react over time? 134 more words

AP Macro

APMacro: Deficit Spending

One potential problem of fiscal policy is the crowding-out effect. If government increases borrowing in order to conduct expansionary fiscal policy, the increased demand for funds in the loanable funds market can increase interest rates. 148 more words

AP Macro

APMacro: Automatic Stabilizers

Automatic stabilizers are policy programs whose actions are counter-cyclical and do not require specific action on the part of policymakers. For example, during recessions, government spending automatically increases for unemployment benefits, food stamps, and other programs when more people meet eligibility requirements. 49 more words

AP Macro

APMacro: Multiplier Effect

Because of the multiplier effect on changes in aggregate demand, the government does not have to fully fill a recessionary or inflationary gap with fiscal policy. 155 more words

AP Macro

APMacro: Fiscal Policy

When significant changes in aggregate demand plunge our economy into recession or drive it into runaway inflation, fiscal policy allows policymakers to use changes in taxes and government spending to correct economic instability. 145 more words

AP Macro