In economics, the multiplier effect refers to the fact that when there is an injection of money to consumers, the consumers spend a certain percentage of it. That amount recirculates through the economy and adds additional income, which comes back to the consumers and of which they spend the same percentage. This process repeats indefinitely, circulating additional money through the economy. Suppose that in order to stimulate the economy, the government institutes a tax cut of $8 billion. If taxpayers are known to save 17% of any additional money they receive, and to spend 83%, how much total money (T) will be circulated through the economy by that single $8 billion tax cut? (Enter your answer rounded to the nearest whole number.)
In economics, the multiplier effect refers to the fact that when there is an injection of money to consumers, the consumers spend a certain percentage of it. That amount recirculates through the economy and adds additional income, which comes back to the consumers and of which they spend the same percentage. This process repeats indefinitely, circulating additional money through the economy. Suppose that in order to stimulate the economy, the government institutes a tax cut of $8 billion. If taxpayers are known to save 17% of any additional money they receive, and to spend 83%, how much total money (T) will be circulated through the economy by that single $8 billion tax cut? (Enter your answer rounded to the nearest whole number.)
Chapter4: Managing Income Taxes
Section: Chapter Questions
Problem 1LTAI
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Transcribed Image Text:In economics, the multiplier effect refers to the fact that when there is an injection of money to consumers, the consumers spend
a certain percentage of it. That amount recirculates through the economy and adds additional income, which comes back to the
consumers and of which they spend the same percentage. This process repeats indefinitely, circulating additional money through
the economy. Suppose that in order to stimulate the economy, the government institutes a tax cut of $8 billion. If taxpayers are
known to save 17% of any additional money they receive, and to spend 83%, how much total money (T) will be circulated
through the economy by that single $8 billion tax cut?
(Enter your answer rounded to the nearest whole number.)
47.0588
billion dollars
Incorrect
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