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

Answer:

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.

Step-by-step explanation:

1. S=$\frac{a_1{} }{1-R}$             2. S=$\frac{a_{1} }{1-R}$

   S=$\frac{1000}{1-0.9}$               S=$\frac{5,000}{1-0.9}$

   S= 10,000          S=50,000

I hope this helps.