B. The Magic of the Multiplier The people in Econoland live on an isolated island. One year a stranger arrived and built a factory to make seashell charms. The factory is considered an investment on Econoland. If the marginal propensity to consume on the island were ?'5 percent, or 0.?5, this would mean that Econoland residents would consume or spend ?5 percent of any change in income and save 25 percent of any change in income. The additional spending would generate additional income and eventually a multiple increase in income. This is called the multiplier effect. When they heard about this multiplier effect, the islanders were thrilled about the new factory because they liked the idea of additional income. The residents of Econoland wanted to know what would eventually happen to the levels of GDP, consumption and saving on the island as the new spending worked its way through the economy. Luckily there was a retired university economist who had settled on Econoland who offered a brief statement of the multiplier. IFIt's simple,\" he said: "One person's spending becomes another (the next} person's income.\" The economist began a numerical example. \"This shows the process," he said. The rounds refer to the new spending moving from resident to resident. He stopped his example at four rounds and added the rest of the rounds to cover all Econoland's citizens. Given the MPC, calculate the level of consumption, savings, and subsequent income for each round. What is the total impact on the economy of Econoland? Round Income {GDP} $10 000 3 4 [additional rounds don't need to be calculated} Total from all 50+ rounds (using the multiplier concept is ea siest)