Scenario 21-2. The following facts apply to a small, imaginary economy.• Consumption spending is $5,200 when income is $8,000.• Consumption spending is $5,536 when income is $8,400.
-Refer to Scenario 21-2. For this economy, an initial increase of $500 in government purchases translates into a
A)$1,428.57 increase in aggregate demand in the absence of the crowding-out effect.
B)$3,125.00 increase in aggregate demand in the absence of the crowding-out effect.
C)$1,428.57 increase in aggregate demand when the crowding-out effect is taken into account.
D)$3,125.00 increase in aggregate demand when the crowding-out effect is taken into account.

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The Answer of Scenario 21-2. The following facts apply to a small, imaginary economy.• Consumption spending is $5,200 when income is $8,000.• Consumption spending is $5,536 when income is $8,400.
-Refer to Scenario 21-2. For this economy, an initial increase of $500 in government purchases translates into a
A)$1,428.57 increase in aggregate demand in the absence of the crowding-out effect.
B)$3,125.00 increase in aggregate demand in the absence of the crowding-out effect.
C)$1,428.57 increase in aggregate demand when the crowding-out effect is taken into account.
D)$3,125.00 increase in aggregate demand when the crowding-out effect is taken into account.