Suppose that the average wage earner saves 14% of her take-home pay and spends the other 86%. Also suppose that 86% of any amount spent is always re-spent (with 14% saved). Estimate the impact that a proposed $30 billion tax cut will have on the economy over the long run due to the additional spending generated. (Round your answer to the nearest integer.)

Solution and Explanation:

A 30bn$ tax cut will mean that there is 35bn$ of added take home pay available to all the wage earners.

This would simply mean that 14% of 30bn $ = 4.2bn$ would be added to the national savings and the rest 86% of 35bn$ = 25.8bn$ would be additional spending. This would inturn generate 25.8bn$ of added income (since someone's expenditure is someone else's income);

So out of this 25.8bn$ 14% will be saved and 86% will be respent; and this chain will continue;

So total added consumption expenditure due to the 30bn $ tax cut =

(Rounded off)

This is the total additional spending (consumption in an economy because of the stimulus provided by the tax cut of 30bn$);

The total impact on the economy over long run = 184bn$ of additional expenditure  

start by isolating the variable on one side by adding 43w^2 to both sides.   the equation will read:

25w^2+5=0

*subtract 5 from both sides*

25w^2=-5

*divide both sides by 25*

w^2=-1/5

*take the square root of both sides*

w=√(-1/5)

the square root of -1 is i.   the square root of 5 remains √5

the answer is i/√5.

hope this