Chapter 8.3, Problem 87E

Multiplier Effect In Exercises 87 and 88, use the following information. A state government gives property owners a tax rebate with the anticipation that each property owner will spend approximately $p\%$ of the rebate, and in turn each recipient of this amount will spend $p\%$ of what he or she receives, and so on. Economists refer to this exchange of money and its circulation within the economy as the “multiplier effect.” 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 of spending that results, assuming that this effect continues without end.

$\begin{array}{l}\text{Tax rebate }p\%\\ \text{\$400 }75\%\end{array}$