Public Policy and Economic Growth - AP Macroeconomics

Tax rate decreases as income increases. Lower-income earners pay higher proportional tax rates.

Promotes economic growth. Builds productive capacity and future economic output.

Contractionary monetary policy. Reduces money supply to control rising price levels.

Tax rate increases as income increases. Higher earners pay proportionally more in taxes.

Consumer Price Index (CPI). Tracks changes in average prices of consumer goods.

Policies aimed at increasing productivity and economic output. Focuses on increasing production capacity and efficiency.

By changing the money supply. More money lowers borrowing costs; less money raises them.

Total amount of money a government owes. Accumulates from years of budget deficits and borrowing.

Through government spending and taxation. Budget changes directly alter total economic demand.

Non-excludable and non-rivalrous goods. Available to all without reducing others' consumption.

Marginal Propensity to Consume. Measures fraction of additional income that gets spent.

Total demand for goods and services in an economy. Combines consumer, business, government, and net export spending.

Inverse relationship between inflation and unemployment. Shows short-term trade-off between price stability and jobs.

High inflation and high unemployment simultaneously. Occurs when monetary and fiscal policies conflict.

Expansionary fiscal policy. Boosts demand through increased spending and lower taxes.

Decreases borrowing. Higher costs discourage loans and major purchases.

Increase economic productivity. Enhances efficiency and long-term economic growth potential.

Manage economic growth and stability. Balances employment, inflation, and sustainable development.

Cyclical unemployment. Results from reduced economic activity and job losses.

Increasing money supply to lower interest rates. Stimulates borrowing and investment through cheaper credit.

Reducing government spending or increasing taxes. Reduces aggregate demand to slow economic overheating.

GDP adjusted for inflation. Removes effects of price changes to show actual growth.

Increases consumer spending. Lower taxes leave more disposable income for purchases.

$\frac{CPI_{new} - CPI_{old}}{CPI_{old}} \times 100$. Measures percentage change in price levels over time.

Gross Domestic Product (GDP). Measures total economic output within national borders.

Increases GDP. Direct injection of money stimulates economic activity.

Monetary policy. Central banks control currency circulation and availability.

Government spending and taxation to influence the economy. Uses government budget tools to manage economic conditions.

$\frac{GDP_{new} - GDP_{old}}{GDP_{old}} \times 100$. Measures percentage change in economic output over time.