Question

suppose You earn Birr 10,000.00 per month and pay 20% tax and spend 60% of it. Again the recipient of the money spent by you pays 20% tax and spends 60% of it. If this process continues without end, find the total amount that wil be paid for the tax​

Answer 1

Answer:

  Birr 5000

Step-by-step explanation:

You will pay 10,000×20% = 2000 in tax. Recipients of your spending will pay ...

  0.60×10,000×20% = 1200

Recipients of the spending at the next level will pay a tax of ...

  0.60×0.60×10,000×20% = 720

That is, the tax amounts have an initial value (a1) of 2000 and a common ratio (r) of 0.60. Their total is given by the formula ...

  sum = a1/(1 -r)

  sum = 2000/(1 -0.6) = 5000

Birr 5000 will be the total amount paid for tax in this process.