Scenario 34-2

question 90

Multiple Choice

Scenario 34-2.The following facts apply to a small,imaginary 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 increases households' wealth by $500,and there is an operative crowding-out effect.
• B)A stock-market boom increases households' wealth by $575,and there is an operative crowding-out effect.
• C)An economic boom overseas increases the demand for U.S.net exports by $600,and there is no crowding-out effect.
• D)Aggregate demand could increase by $1,500 in response to any of these events.

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Definitions:

Accounting Measurements

The process of quantifying financial information in dollars or units to report financial position and performance.

Revenue Recognition

The accounting principle that deals with the conditions under which revenue is recognized and recorded on the financial statements.

Installment Method

An accounting method used to recognize revenue and expenses on long-term contracts and other sales where payment is received in installments.

Qualitative Characteristic

Features or attributes that describe the non-numeric aspects of goods, services, processes or information, often related to quality.