Scenario 34-1

Multiple Choice

Scenario 34-1. Take the following information as given for a small economy:
• When income is $10,000, consumption spending is $6,500.
• When income is $11,000, consumption spending is $7,250.
-Refer to Scenario 34-1. For this economy, an initial increase of $200 in net exports translates into a(n)

A) $570 increase in aggregate demand when the crowding-out effect is taken into account.
B) $800 increase in aggregate demand when the crowding-out effect is taken into account.
C) $1,400 increase in aggregate demand in the absence of the crowding-out effect.
D) $800 increase in aggregate demand in the absence of the crowding-out effect.