Scenario 16-2

Multiple Choice

Scenario 16-2. 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 16-2. In response to which of the following events could aggregate demand increase by $1,500?

A) A stock-market boom increases households' wealth by $300, and there is an operative crowding-out effect.
B) A stock-market boom increases households' wealth by $275, and there is an operative crowding-out effect.
C) An economic boom overseas increases the demand for U.S. net exports by $240, and there is no crowding-out effect.
D) Aggregate demand could increase by $1,500 in response to any of these events.