What happens after the policy lever gets pulled. Money growth and inflation in the long run, the short-run vs. long-run Phillips curve, government deficits and the national debt, and the determinants of long-run economic growth.
Seven topics from the College Board CED, in order.
Topic 5.1
Money Growth & Inflation
The quantity theory of money and why, in the long run, excessive money growth shows up as inflation rather than higher real output.
Topic 5.2
The Short-Run Phillips Curve
The inverse relationship between inflation and unemployment that appears in the short run.
Topic 5.3
The Long-Run Phillips Curve & Expectations
Why the short-run trade-off disappears once expectations adjust, leaving a vertical long-run Phillips curve at the natural rate of unemployment.
Topic 5.4
The Money Growth Rule & Policy Effectiveness
The monetarist case for a steady, predictable rate of money growth, and the debate over how effective active stabilization policy really is.
Topic 5.5
Government Deficits & the National Debt
The difference between an annual budget deficit and the accumulated national debt, and how deficits compound into debt over time.
Topic 5.6
Crowding Out Revisited
How sustained government borrowing affects the loanable funds market, interest rates, and long-run private investment.
Topic 5.7
Economic Growth & Public Policy
The determinants of long-run growth — human capital, physical capital, technology — and how public policy can encourage or discourage it.
About Unit 5
Unit 5 asks the question every other unit sets up but doesn't fully answer: what happens after the short run? You'll learn why money growth that outpaces real output growth shows up as inflation rather than lasting gains in output, why the inflation-unemployment trade-off from the Phillips curve vanishes once people adjust their expectations, and how today's budget deficits accumulate into tomorrow's national debt — with real consequences for interest rates, investment, and growth.
This unit is roughly 20–30% of the AP Macro exam — tied with Unit 3 for the most heavily weighted unit — and takes about 18–22 class periods. It pulls together ideas from Units 2, 3, and 4 into a long-run view, so a strong foundation in those units makes Unit 5 much more manageable.
The College Board ties Unit 5 to three Big Ideas that recur across the whole course:
Big Idea 1
In the long run, money growth becomes inflation, not output
Big Idea 2
Expectations erase short-run trade-offs over time
Big Idea 3
Today's deficits are tomorrow's constraints on growth