Answer Happy

Refer to the interactive below: The Spending Multiplier INCOME AND SPENDING CALCULATIONS Round Change in Income Taxes Paid Disposable Income Change in Spending Cumulative Change in Income E SETTINGS Change in Autonomous Expenditure (-$50,000 or +$50,000) MPC (0.01 -0.99) Tax Rate (0.00 - 1.00) CHANGE IN INCOME Spending Multiplier Total Change in Aggregate Income Spending Rounds 10,000.00 0.80 0.00 5.00 Reset $50,000.00
Suppose the following list of events describes all of the economic activity resulting from an increase in government spending. Suppose that at each step after the initial one, the marginal propensity to consume is 0.74 and there are no taxes. Step O. The government spends $4500 on meat to host a very large dinner for foreign diplomats. Step A. The butcher takes the income earned by selling the meat, saves some, and spends the rest on a wedding cake for his daughter. Step B. The baker who produced the wedding cake saves some of her earnings and uses the rest to purchase beautiful candlesticks as gifts for all of her friends. Step C. The local candlestick maker saves some of his revenue for retirement and spends the rest on building materials to improve his house. Instructions: Modify the settings in the interactive tool to represent this event. Then click "Spending Rounds" and use the table to answer the following questions. Round answers to the nearest cent, if necessary. How much does the candlestick maker earn for selling the candlesticks? $ How much does the candlestick maker spend on building materials?