When money is spent on goods and services, those that receive the money also spend some of it. The people receiving some of the twice-spent money will spend some of that, and so on. Economists call this chain reaction the multiplier effect. In a hypothetical isolated community, the local government begins the process by spending D dollars. Suppose that each recipient of spent money spends and saves of the money that he or she receives. The values c and s are called the marginal propensity to consume and the marginal propensity to save and, of course, c + s = 1.
(a) Let Sn be the total spending that has been generated after n transactions. Find an equation for Sn.
(b) Show that limn→∞ Sn = kD, where k = 1/s. The number k is called the multiplier. What is the multiplier if the marginal propensity to consume is 80%?
1. Reed Corp. sells $700,000 of bonds to private investors. The bonds are due in five years, have a 4% coupon rate and interest is paid semiannually. The bonds were sold ...Jun 26 2021
Zero Calories Company has 16,000 shares of cumulative preferred 1% stock, $40 par and 80,000 shares of $150 par common stock. The following amounts were distributed as di...Apr 05 2020
The most common form of gene expression regulation in both bacteria and eukaryotes is (A) Translational control (B) Transcriptional control (C) Post-transcriptional...Mar 15 2018
Two very long concentric cylinders of diameters D1 = 0.35 m and D2 = 0.5 m are maintained at uniform temperatures of T1 = 950 K and T2 = 500 K and have emissivities ε1 = ...Jul 19 2020
According to Porter’s Five Competitive Forces Model which of the following pull(s) prices down and push(es) cost of doing business up?[A] Rivalry [B] The threat of new e...Nov 28 2017
Laughlin Designs, Inc., purchased a computerized blueprint printer that will assist in the design and display of plans for factory layouts. The cost of the printer was $2...May 21 2020
A television set sells for $1,000 U.S. dollars. In the spot market, $1 = 110 Japanese yen. If purchasing power parity holds, what should be the price (in yen) of the same...Aug 17 2020
Cecil Jameson, Attorney-at-Law, is a proprietorship owned and operated by Cecil Jameson. On July 1, 2018, the company has the following assets and liabilities: cash, $1,0...Apr 09 2021
What would be the correct order for the preparation of financial statements?Jun 09 2021
The LMN Corporation is considering an investment that will cost $80,000 and havea useful life of 4 years. During the first 2 years, the net incremental after-tax cash flo...Jul 20 2021