AP®︎ Macroeconomics: Topic 5.5 Flashcards

Master key terms and definitions for Topic 5.5 of AP Macroeconomics – Crowding Out to help you prep for quizzes and the AP exam.

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Term

Crowding Out

Definition

Government borrowing raises real interest rates and reduces interest-sensitive private spending, especially investment.

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Crowding Out
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Government borrowing raises real interest rates and reduces interest-sensitive private spending, especially investment.

POL-3.CPOL-3.C.3
Government Borrowing in a Budget Deficit
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When tax revenue is below spending, the government borrows funds to finance the gap.

POL-3.CPOL-3.C.1
Long-Run Impact of Crowding Out
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Less private investment slows physical capital formation and can reduce long-run economic growth.

POL-3.CPOL-3.C.4
Crowding Out and Fiscal Policy
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Government borrowing raises real interest rates, reducing private investment and weakening aggregate demand.

POL-3.CPOL-3.C.2