How much will the total income of the town grow by

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Reference no: EM13231724

A certain town has yearly exports that total $40 million. It has no imports.

The town's marginal propensity to consume residence expenditures from their income is 0.15

The town's marginal propensity to spend on other things is 0.65

The households in the town keep a balance between their expenses on residence and their expenses on other products: for every $3 they spend on residence, they spend $7 on other products.

Assume that the price of residence and the price of other products never changes.

In such a situation, what'll be the total income of the town? And for every increase of $1 million in exports, how much will the total income of the town grow by?

Reference no: EM13231724

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