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.

---

Definitions:

Microeconomics

studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources.

Macroeconomics

The branch of economics that studies the behavior and performance of an economy as a whole, focusing on total national income, employment, and price levels.

Equilibrium Price

The price at which the quantity of a good or service supplied is equal to the quantity demanded, resulting in market balance.

Economics

The social science that studies the production, distribution, and consumption of goods and services.