Scenario 16-1

Multiple Choice

Scenario 16-1. Take the following information as given for a small, imaginary economy:

-Refer to Scenario 16-1. For this economy, an initial increase of $500 in net exports translates into a

A) $2,000 increase in aggregate demand when the crowding-out effect is taken into account.
B) $2,500 increase in aggregate demand when the crowding-out effect is taken into account.
C) $2,000 increase in aggregate demand in the absence of the crowding-out effect.
D) $2,500 increase in aggregate demand in the absence of the crowding-out effect.