Scenario 16-2

question 124

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. 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:

Bootlegging Funds

The unauthorized allocation of resources or funds for projects or activities not formally sanctioned by organizations; often done covertly to pursue innovative ideas.

Management Scrutiny

The thorough and detailed review or examination of corporate management practices and performance.

Process Innovations

The implementation of new or significantly improved production or delivery methods in an organization.

Product Innovations

The creation or significant improvement of goods or services that offer new or additional benefits to the customer.