Unit 5: Long-Run Consequences of Stabilization Policies

Reduction in private __ due to increased government __________ for loanable funds, which drives up real interest rates.

Government policies and programs that automatically _ to stabilize the economy without requiring any new legislative action.

In the long run, changes in the money supply primarily affect the __ level, NOT real output or employment.

Expressed as MV=PQ, where M is money supply, V is velocity, P is price level, and Q is real output. Assumes V and Q are relatively __ in the long run.

Occurs when government spending __ tax revenue in a *single year*.