Scenario 16-2

question 177

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. 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 $225, and there is an operative crowding-out effect.
• C) An economic boom overseas increases the demand for U.S. net exports by $300, and there is no crowding-out effect.
• D) An economic boom overseas increases the demand for U.S. net exports by $225, and there is no crowding-out effect.

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Definitions:

Retrospectively

A method of application where the rules or standards are applied to actions, transactions, or situations that have occurred in the past.

Retrospective Restatement

The process of revising previously issued financial statements to correct errors or to reflect changes in accounting policies, as if the new information had been known at the original reporting date.

Material Error

A significant mistake in financial reporting that could influence the economic decisions of users of the financial statements.