AP®︎ Macroeconomics: Topic 5.3 Flashcards

Master key terms and definitions for Topic 5.3 of AP Macroeconomics – Money Growth and Inflation to help you prep for quizzes and the AP exam.

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Term

Demand-Pull Inflation

Definition

Rising prices caused by increased aggregate demand, usually with higher real output in the short run.

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Demand-Pull Inflation
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Rising prices caused by increased aggregate demand, usually with higher real output in the short run.

POL-3.A
Cost-Push Inflation
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Rising prices caused by falling short-run aggregate supply from higher input costs or supply shocks.

POL-3.A
Wage-Price Spiral
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A self-reinforcing cycle where higher wages raise costs and prices, prompting demands for still higher wages.

POL-3.A
Monetary Neutrality
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In the long run, changes in the money supply affect nominal variables, not real output.

POL-3.APOL-3.A.2
Velocity of Money
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The average number of times a dollar is spent on final goods and services in a period.

POL-3.A
Quantity Theory of Money
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States that MV = PY, where money growth mainly changes prices in the long run.

POL-3.APOL-3.A.3
Inflation as a Monetary Phenomenon
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Sustained money growth faster than real output growth causes long-run inflation.

POL-3.APOL-3.A.1
Deflation
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A sustained decrease in the overall price level over time.

POL-3.APOL-3.A.1