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NCAA STADIUM FINANCE EXAM 3 QUESTIONS & ANSWERS 2024/2025
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NCAA STADIUM FINANCE EXAM 3 QUESTIONS & ANSWERS 2024/2025
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NCAA STADIUM FINANCE EXAM 3QUESTIONS & ANSWERS 2024/2025
Why might the Simple Multiplier be an inaccurate measure of the total amount of
money circulating in an economy from a given direct investment into the economy? - ANSWERSThe
Simple Multiplier assumes a closed economy. In an open economy there would
likely be leakages out of the 'local' economy.
If the marginal propensity to consume is 0.6 and a direct investment of $1,000,000 is
made what would be the quantity of money flowing through the economy according to
the Simple Multiplier? - ANSWERSTotal Benefit = (1/1-0.6) * $1,000,000 = $2,500,000
If the marginal propensity to save is 0.3 and a direct investment of $1,000,000 is made
what would be the quantity of money flowing through the economy according to the
Simple Multiplier?
Remember MPC + MPS = 1, so MPS = 1 - MPC. - ANSWERSTotal Benefit = (1/0.3) * $1,000,000 =
$3,333,333
Why is the multiplier effect different for small cities relative to large cities? - ANSWERSThe smaller the
city the more leakages you will have in the local economy. For the smaller city, the multiplier is likely to
be smaller.
When there is a negative externality, is there an under or over allocation of the good? - ANSWERSWith a
negative externality there is an over allocation of the good. Taking into account social costs (supply
curve) equilibrium will occur at a lower output.
When there is a positive externality, is there an under or over allocation of the good? - ANSWERSWith a
positive externality there is an under allocation of the good. Taking into account social demand
equilibrium will occur at a higher output.
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