Why do economists care about aggregate expenditures?
What will be an ideal response?
Increases and decreases in aggregate expenditures cause the year-to-year fluctuations in GDP. Economists devote considerable time and energy to forecasting what will happen to each component of aggregate expenditure. If they forecast aggregate expenditures will decline in the future, this is equivalent to saying that GDP will decline and the economy will enter into a recession. This means fewer job opportunities, lower wages, and lower profits.
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The government has decided to give every person in the U.S. a $5 coupon that they can use at the grocery store to purchase their choice of cheese. We would expect this policy to lead to
A) an increase in aggregate demand but not equivalent to the full impact of all of the coupons redeemed due to some direct expenditure offset. B) no increase in aggregate demand because there would be no direct expenditure offset. C) an increase in aggregate demand equivalent to the full impact of all of the coupons redeemable. D) no increase in aggregate demand due to the Ricardian equivalence theorem.
From the date a U.S. patent is granted to a firm, it ceases to be a potential source of monopoly profits after
A. 7 years. B. 20 years. C. 14 years. D. 1 year.