When you spend $1 at the grocery store, the store doesn’t keep all of your money as profit. Some of it is reinvested in the economy when the grocery store buys more merchandise from suppliers. In turn, the suppliers don’t keep all of that money as profit, either; they reinvest it in the economy when they buy more raw materials from other suppliers. The end result is that your $1 may have a larger effect on the economy. Consider the following situation.

Question

In January, a factory invests $400,000 into the economy in the form of employee salaries. During February, assume that the employees reinvest in the economy by spending 80% of their salaries. Then, during March, 80% of what was spent by the employees is again reinvested in the economy by the merchants. And so on.

Find the amount of money that is invested during the first four months. ______________ ______________ ______________ ______________ Month 1 (Jan.) Month 2 (Feb.) Month 3 (Mar.) Month 4 (Apr.)