Author Question: A new major league baseball expansion team is moving to your town. It will inject consumer spending ... (Read 53 times)

silviawilliams41 · **on:** Jun 30, 2018

A new major league baseball expansion team is moving to your town. It will inject consumer spending worth 40 million into your local economy initially. The Chamber of Commerce predicts that this will generate a total of 500 million in additional spending for your town. The team owners think that this is an underestimate. What do you need to know to figure out who is right? Explain.

Question 2

Which of the following would be most likely to encourage capital formation in a less-developed country?
a. The expectation of sustained high inflation.
b. The expectation that property rights will be highly secure in the years ahead.
c. The imposition of high tariffs and other restraints limiting imports.
d. Higher personal and corporate tax rates.

flexer1n1 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

You need to know the size of the spending multiplier. If it is equal to 12.5, then the Chamber of Commerce is right (40 12.5 = 500). If it is greater than 12.5, then the team owners are right.

Answer to Question 2

b