Suppose the mayor’s advisory committee report on the possible economic impacts o

Question

Suppose the mayor’s advisory committee report on the possible economic impacts of hosting the summer olympics proposes that there will be 1.5 million attendees at the olympic events and each attendee will spend $2,000 in the city during the 10 days of the olympics.

The advisory committee has estimated the average multiplier to be 2.5. If the advisory committee is correct, the olympics will generate $ _________ in spending in the city. (include commas in your numeric response)

Do you agree with the advisory committee? (yes/no)

Why do you agree or disagree?

Explanation / Answer

As attendee spend $2,000 in the city during the 10 days. Total spending by 1.5 million attendees will be $3000 million. This will increase Aggregate Demand by $3000 million by consumption. So if multiplier is 2.5 then total GDP will increase by $7,500 million. The advisory committee is correct on this because

change in GDP = multiplier * change in spending

$7500 million = 2.5 * $3000 million

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.