Fiscal multipliers baseball stadium

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  • 1. Short Quiz 1. Calculate the Real GDP of Travistan if GDP is grew by 5% in 2012. 2011 CPI: $50 2012 CPI: $55 2. What is happening in this country? 3. What fiscal policy change would you recommend? 4. What multiplier does the Federal Reserve care about? (formula)
  • 2. • Monetary change • Francisco deposits $100 into a CD • Reserve Requirement: 5% • How much new money will his deposit create?
  • 3. Glendale, Arizona • Fiscal policy: increase spending by $500 million • MPC: .9 • How much economic growth could we expect? • “Leakage”
  • 4. Recommend a fiscal policy for Tucson • Hosting a MLB team will bring in $31 million per year to the Tucson GDP • Building a new complex to attract a team will cost $100 million 1. Prepare a proposal to the city of Tucson complete with fiscal multiplier (MPC = .6) How much economic growth would the stadium create? 2. Would you cut services or raise taxes on to pay for the stadium? (At least 5 fiscal areas) 3. Assuming the city collects 5% of the $31 million (per year) in sales tax, how many years would it take to pay the stadium off? 4. Do you recommend this $100 million project? Explain