Scenario 34-2

Multiple Choice

Scenario 34-2. The following facts apply to a small economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
-Refer to Scenario 34-2. 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 $550, and there is a small operative crowding-out effect.
C) An economic boom overseas increases the demand for U.S.net exports by $550, and there is no crowding-out effect.
D) An economic boom overseas increases the demand for U.S.net exports by $300, and there is no crowding-out effect.