Scenario 34-2

question 102

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.

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Definitions:

Debt-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by shareholder equity.

Return On Assets

A measure of how effectively a company uses its assets to generate profit, calculated as net income divided by total assets.

Return On Equity

A measure of the profitability of a business in relation to the equity, calculated by dividing net income by shareholders' equity.

Profit Margin

A financial metric used to assess a company's profitability by comparing net income to sales. It's often expressed as a percentage indicating how much of each dollar in sales a company keeps as profit.