Activity:Calculating a Multiplier effect

Suppose thatyou live in a remote small town anda new family moves into your town and builds a $300,000 house, using local labour and materials.This will add $300,000 to theincomesof the townspeople involved. While some of this increase in incomes will go to taxes and some will be saved, much of it will bespenton consumer goods and services, such as clothes, home repairs, restaurant dinners, and so on.To those who receive this money - the tailor, plumber, and restaurant owner and employees - it represents an increase in theirincome. They willspenda large part of it on a variety of goods and services.This "income-spending-income" process will continue until theyend upzero.

Please complete the following table, and find the total spending and total income generated as a result of the new house building.

Question:How does the initial investment (the new house) will add up to additional incomes? What is the multiplier?