Suppose the government is making a 9000000 expenditure for e

Suppose the government is making a 9,000,000 expenditure for educational improvement. If 70% of this is spent again, and so on, what is the total effect on the economy?

The total effect on the economy will be $______?

(Round to the nearest dollar as needed.)

Solution

If the government is making a 9,000,000 expenditure for educational improvement and if 70% of this is spent again, and so on, we get a geometric series 900000, 900000*(0.7), 900000*(0.7)²,......We know that the S, the sum of an infinite geometric series with first term a and common ratio r is given by S = a/(1-r). Here S = 9000000/(1-0.7) = 9000000/0.3 = $ 30000000.