The year is 2010. The government has thought about strengthening the public following the collapse with an increase interest compensation for indebted households (direct payments to these parties). At the same time, the government wants to stimulate total expenditure and economic activity with the payment of such benefits. Statisticians have told the government that each person spends 65% of all their income he will get and each of them who gets the spending, he also spends 65% of it and this process keeps continue without end. Let's assume that the government will allocate 5 billion ISK to of the project. a. How much can it be estimated that the economy will recover in terms of of the total consumption that will occur due to these interest benefits taking into account the multiplier effect (e. Multiplier principle)? b. How much will the economy be stimulated if individuals spend 85% of the income they receive?
The year is 2010. The government has thought about strengthening the public following the collapse with an increase interest compensation for indebted households (direct payments to these parties). At the same time, the government wants to stimulate total expenditure and economic activity with the payment of such benefits. Statisticians have told the government that each person spends 65% of all their income he will get and each of them who gets the spending, he also spends 65% of it and this process keeps continue without end. Let's assume that the government will allocate 5 billion ISK to of the project. a. How much can it be estimated that the economy will recover in terms of of the total consumption that will occur due to these interest benefits taking into account the multiplier effect (e. Multiplier principle)? b. How much will the economy be stimulated if individuals spend 85% of the income they receive?
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