A sporting event is to be held at the Superdome in New Orleans, Louisiana, which holds about 95,000 people. Suppose 50,000 visitors arrive in New Orleans and spend $500 each. In the month after the event, the people in New Orleans spend 60% of the income from the visitors. The next month, 60% is spent again, and so on.
a. What is the initial amount the visitors spent?
b. In the long run, how much money does this sporting event seem to add to the New Orleans economy?
c. The ratio of the long-run amount to the initial amount is called the economic multiplier. What is the economic multiplier in this example?
d. If the initial amount spent by visitors is $10,000,000 and the economic multiplier is 1.8, what percentage of the initial amount is spent again and again in the local economy?