A state government gives property owners a tax rebate with the anticipation that

Question

A state government gives property owners a tax rebate with the anticipation that each property owner spends approximately p% ofthe rebate, and in turn each reco ent this amount will spend p% of what they receive, and so on. Economists refer to this exchange of money and its circulation within the economy as the "multipler emect." The multiplier effect operates on the idea that the expenditures of one individual become the income of another individual. For the given tax rebate, find the total amount put bace into the state's economy, assuming that this effect continues without end. (Round your answer to the nearest cent.) Tax rebate $560 p% 50% Need Help? wasTk to Ter Aninvestment firm has a bob opening with a salary of S44,000 for the first year. During the next 34 years, there is a 4% rate each year. ,ind the ttal 35-year period. (Round your answer to the nearest cent.) ton over the

Explanation / Answer

a) Sum of an infinite Geometric Series = A/(1-r) Rebate A $560.00 Rate 50.00% Sum of an infinite Geometric Series = $560/(1-50%) $1,120.00 b) Sum of finite Series = A x (1-r^n)/(1-r) Compensation in first year A = $44,000.00 Period n 35 years Rate = R = 4.00% Total Compensation = $44,000 x (1-1.04%^35)/(1-1.04%) $3,240,697.89

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