Suppose consumers save 17 percent of their incomes. If the government collects 10 dollar in taxes from each taxpayer and invested it in infrastructure, total social investment will ________ per taxpayer.

Question

Quizplus · Accepted Answer

If consumers save 17% of their incomes, it means they spend 83% of their incomes.

So, if the government collects $10 in taxes from each taxpayer, the taxpayer has $90 left after taxes.

If the taxpayer spends 83% of this amount ($74.70), they will save 17% ($15.30).

If the government invests $10 in infrastructure, the total social investment will be $10 + $15.30 = $25.30.

Therefore, the total social investment will increase by $8.30 per taxpayer.

Suppose Consumers Save 17 Percent of Their Incomes