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# Get answer: When money is spent on goods and services, those who receive the money also

ISBN: 9781305270336 484

## Solution for problem 73 Chapter 11.2

Single Variable Calculus: Early Transcendentals | 8th Edition

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Single Variable Calculus: Early Transcendentals | 8th Edition

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Problem 73

When money is spent on goods and services, those who 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 100c% and saves 100s% 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 1 s 1. (a) Let Sn be the total spending that has been generated after n transactions. Find an equation for Sn. (b) Show that limnl` Sn kD, where k 1ys. The number k is called the multiplier. What is the multiplier if the marginal propensity to consume is 80%? Note: The federal government uses this principle to justify deficit spending. Banks use this principle to justify lending a large percentage of the money that they receive in deposits.

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##### ISBN: 9781305270336

This textbook survival guide was created for the textbook: Single Variable Calculus: Early Transcendentals, edition: 8. Since the solution to 73 from 11.2 chapter was answered, more than 222 students have viewed the full step-by-step answer. The answer to “When money is spent on goods and services, those who 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 100c% and saves 100s% 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 1 s 1. (a) Let Sn be the total spending that has been generated after n transactions. Find an equation for Sn. (b) Show that limnl` Sn kD, where k 1ys. The number k is called the multiplier. What is the multiplier if the marginal propensity to consume is 80%? Note: The federal government uses this principle to justify deficit spending. Banks use this principle to justify lending a large percentage of the money that they receive in deposits.” is broken down into a number of easy to follow steps, and 178 words. Single Variable Calculus: Early Transcendentals was written by and is associated to the ISBN: 9781305270336. The full step-by-step solution to problem: 73 from chapter: 11.2 was answered by , our top Calculus solution expert on 03/19/18, 03:29PM. This full solution covers the following key subjects: . This expansive textbook survival guide covers 95 chapters, and 5427 solutions.

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