A new factory in a small town has an annual payroll of $6 million. It is expected that 60% of this money will be spend on the town will by factory personnel. The people in the town who receive this money are expected to spend 60% of what they receive in the town, and so on. (a) What is the total of all this spending (called the “total economic impact”) of the factory on the town each year? (b) How much additional spending will be generated by a 10 million dollar tax rebate if 60% of all income is spent?
A new factory in a small town has an annual payroll of $6 million. It is expected that 60% of this money will be spend on the town will by factory personnel. The people in the town who receive this money are expected to spend 60% of what they receive in the town, and so on. (a) What is the total of all this spending (called the “total economic impact”) of the factory on the town each year? (b) How much additional spending will be generated by a 10 million dollar tax rebate if 60% of all income is spent?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A new factory in a small town has an annual payroll of $6 million. It is expected that 60% of this money
will be spend on the town will by factory personnel. The people in the town who receive this money are
expected to spend 60% of what they receive in the town, and so on.
(a) What is the total of all this spending (called the “total economic impact”) of the factory on the town
each year?
(b) How much additional spending will be generated by a 10 million dollar tax rebate if 60% of all
income is spent?
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