Scenario 24-2

question 382

Multiple Choice

Scenario 24-2.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 24-2.For this economy,an initial increase of $500 in government purchases translates into a

• A) $1,428.57 increase in aggregate demand in the absence of the crowding-out effect.
• B) $3,125.00 increase in aggregate demand in the absence of the crowding-out effect.
• C) $1,428.57 increase in aggregate demand when the crowding-out effect is taken into account.
• D) $3,125.00 increase in aggregate demand when the crowding-out effect is taken into account.

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Definitions:

Sale For Goods

A transaction involving the transfer of ownership of goods from a seller to a buyer for a price.

Auto Dealer

A business entity that sells new or used cars at the retail level, based on a dealership contract with an automaker.

Pre-owned Vehicle

A vehicle that has had one or more previous owners, commonly referred to as a used car.

Promotes Commerce

Enhances or encourages the exchange of goods and services among parties, often leading to economic growth.