Suppose the following list of events describes all of the economic activity resulting from an increase in government spending. Suppose that at each step after the initial one, the marginal propensity to consume is 0.75, and there are no taxes Step 0. The government spends $5,000 on meat to host a very large dinner for foreign diplomats. Step A. The butcher takes the income daughter. arned by selling the meat, saves some, and spends the rest on a wedding cake for his
Step B. The baker who produced the wedding cake saves some of her earnings and uses the rest to purchase beautiful candlesticks as gifts for all of her friends.
Step C. The local candlestick maker saves some of his revenue for retirement and spends the rest on building materials to improve his house.
Instructions:
Modify the settings in the interactive tool to represent this event. Then click "Spending Rounds" and use the table to answer the following questions. Round answers to the nearest cent, if necessary
1. How much does the baker earn for selling the cake? $
2. How much does the baker spend on candlesticks? $

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In the supply-and-demand schedule shown above, at the lowest price of $50, producers supply music players and consumers demand music players.