Question

The government has decided to give a $1,000 tax rebate to each household in order to stimulate the economy. The government statistics say that each household will spend 90% of the rebate in goods and services. The businesses and individuals who benefited from that 90% will then spend 90% of what they received and so on.

What is the total effect of the rebate on the economy?

What will the total effect be if the rebate is $5000 to each household in order to stimulate the economy if each household will spend 90% of the rebate in goods and services?

Answer 1

1.) The total effect of 90% of the $1,000 tax rebate would be 10,000 growth in the economy. Second question, the total effect of 90% of $5,000 would be 50,000 in growth in the economy. *Same concept different amount.

Explanation:

1. S=
`\frac{a_1{} }{1-R}` 2. S=
`(a_(1) )/(1-R)`

S=
`(1000)/(1-0.9)` S=
`(5,000)/(1-0.9)`

S= 10,000 S=50,000

I hope this helps.