When we discussed the multiplier we discussed the impact effect. for example, suppose that g increases by 100 to 600 and we assume, as we often do, that firms match the increase in demand by increasing y by 100. in round two, this is an increase in income of 100 to consumers. we will trace out exactly where this 100 increase in income goes in the second round. recall, there are three leakages to address (via taxes, imports and savings)
given that t=.25, we know that .25 of every dollar increase in gross income is a leakage due to taxes. since the increase in income is $100, we know the leakage due to taxes is:
a) $25
b) $100
c) $75
d) 25 cents.

1. which one of the following would be an example of a supply-side market failure? a. a gas station is slowly leaking diesel fuel from its underground tanks, and after the leak is discovered, the business immediately cleans up the pollution at its own expense. b. a gas station is slowly leaking diesel fuel from its underground tanks, but the state uses taxpayer money to clean up the pollution rather than requiring the business to pay. c. your business wants to attract repeat customers by putting on a customer-appreciation picnic at a public park, but you decide not to because you couldn't prevent noncustomers from consuming the food and entertainment you provided. d. everyone rushes to the local retail outlet at midnight on the day of the release of a new video game console, and the store runs out before everyone is able to buy one.