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. In response to which of the following events could aggregate demand increase by $1,500?
A)A stock-market boom stimulates consumer spending by $300, and there is an operative crowding-out effect.
B)A stock-market boom stimulates consumer spending by $225, and there is an operative crowding-out effect.
C)An economic boom overseas increases the demand for U.S. net exports by $300, and there is no crowding-out effect.
D)An economic boom overseas increases the demand for U.S. net exports by $225, and there is no crowding-out effect.

Question

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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. In response to which of the following events could aggregate demand increase by $1,500?
A)A stock-market boom stimulates consumer spending by $300, and there is an operative crowding-out effect.
B)A stock-market boom stimulates consumer spending by $225, and there is an operative crowding-out effect.
C)An economic boom overseas increases the demand for U.S. net exports by $300, and there is no crowding-out effect.
D)An economic boom overseas increases the demand for U.S. net exports by $225, and there is no crowding-out effect.