Final answer:
The gross income multiplier formula accounts for taxes, savings, and imports to predict how spending circulates through the economy. Using the given values, the multiplier is calculated as 0.5625 based on the information that taxes take 0.25 of every dollar spent, with further reductions for savings and imports.
Step-by-step explanation:
The formula to calculate the gross income multiplier is based on understanding how spending circulates through the economy after an initial increase in expenditures and comprises several factors including taxes, savings, and spending on imports. In the scenario provided, where a G value of 331.25 is an increase of 131.25 from its original level of 200, the multiplier effect can be deduced. In this context, for every dollar spent, 0.25 is paid in taxes, leaving 0.75. Then, out of the after-tax income, 0.15 is saved and 0.1 spent on imports. Therefore, the multiplier can be calculated as: 1 - (taxes + savings + imports), leading to 1 - 0.25 - 0.1125 - 0.075 = 0.5625. To summarize the entire process, if there is a fourth-round increase in the economy, we account for the proportions of income that go toward taxes, savings, and imports to determine the cumulative effect on income through the economy.