Question 1

If local consumers spend 40 cents of each dollar of income locally, a $1 million direct spending project will produce how much local economic impact?&#10;A)$1 million&#10;B)1.4 million&#10;C).4 million&#10;D)$1.67 million

Accepted Answer

If local consumers spend 40 cents out of every dollar locally, then out of the $1 million spent, $400,000 (40% of $1 million) will be spent locally. However, this $400,000 will again circulate in the local economy and will have a multiplier effect. Using the multiplier effect formula (1/1-MPC), where MPC is the marginal propensity to consume locally (0.4), we get a multiplier of 1.67. Therefore, the local economic impact will be $400,000 x 1.67 = $668,000. Adding the initial $1 million spending, the total local economic impact will be $1 million + $668,000 = $1.67 million.

Question 2

The primary question to be asked regarding the economic impact of an event or institution is&#10;A)How would the local economy differ if this institution or event did not exist?&#10;B)How does the average local household benefit from this institution or event?&#10;C)How much does the institution or event add to aggregate local earnings?&#10;D)To what degree does the institution or event lead to future economic growth?

Accepted Answer

The question of how the local economy would differ without the event or institution is crucial in determining its economic impact. This allows for a comparison between the economic activity generated by the event or institution and the alternative economic activity that would exist without it.

Question 3

The two main components of an economic base model are&#10;A)Export goods and local services&#10;B)Consumption goods and investment spending&#10;C)Direct spending and multiplier effects&#10;D)Supply and demand functions

Accepted Answer

An economic base model focuses on the export goods and local services that drive economic growth within a community. Export goods are produced in the community and sold outside of it, bringing in outside money and stimulating the local economy. Local services are those that serve the needs of the local population, such as healthcare, education, and retail. These two components together make up the core of the economic base model.

Question 4

The main components of the multiplier effect are induced and indirect income.Induced income refers to&#10;A)Income produced by spending on local materials, energy, etc.as part of operating expenses&#10;B)Income produced by spending at local restaurants or stores as part of attending the institution or event&#10;C)Income produced by spending by the institution's employees&#10;D)Income produced by local businesses

Accepted Answer

Income produced by spending by the institution's employees is induced income.

Question 5

All of the following are criticisms of the New York Sports and Convention Center impact study EXCEPT&#10;A)Added local spending estimates did not exclude local residents.&#10;B)The center's proposed stadium would replace another local facility&#10;C)The land had other, more valuable uses&#10;D)The multiplier covered an area that included the current facility

Accepted Answer

Added local spending estimates did not exclude local residents.

Question 6

The formula for the Keynesian spending multiplier is (MPC is the marginal propensity to consume, MPS is the marginal propensity to save)&#10;A)1/(1-MPC)&#10;B)(1-MPC)&#10;C)1/(1-MPS)&#10;D)1/(MPC-MPS)

Accepted Answer

The Keynesian spending multiplier formula is 1/(1-MPC), which represents the amount by which gross domestic product (GDP) increases in response to an increase in government spending or investment. The MPC represents the portion of additional income that is spent rather than saved. Therefore, the larger the MPC, the larger the spending multiplier, as more of the additional income is spent and cycles through the economy. Choice A is the only option that accurately reflects the Keynesian spending multiplier formula.

Question 7

Input-Output Models&#8230;.&#10;A)assume that each industry's output is comprised of a fixed set of inputs&#10;B)are used almost exclusively for economic impact studies&#10;C)are based on the Keynesian flow of income model&#10;D)are rarely used in regional economic impact studies

Accepted Answer

Input-Output models assume that each industry's output is comprised of a fixed set of inputs.

Question 8

The economic impact of a university might include all of the following EXCEPT&#10;A)Increased human capital in the state or region&#10;B)The effects of student spending&#10;C)The effects of employee spending&#10;D)The net effects of the university on local government budgets&#10;E)None.All of the above are possible parts of economic impact

Accepted Answer

All of the choices listed (A through D) are indeed possible components of the economic impact of a university. Universities contribute to human capital development, influence spending through students and employees, and can affect local government budgets through various means, such as infrastructure demands or property tax revenues.

Question 9

Criticisms of economic impact analysis include all of the following EXCEPT...&#10;A)Emphasis on the local rather than national economy&#10;B)Failure to consider effects on other areas&#10;C)Often including capital or other costs as part of the positive economic impact&#10;D)A lack of political interest in this type of analysis

Accepted Answer

While there may be various criticisms of economic impact analysis, there is typically a significant amount of political interest in this type of analysis as it is often used to justify government or private sector investments. Therefore, option D is the exception and is incorrect. A, B, and C are all valid criticisms of economic impact analysis.

Question 10

Direct spending for an audience-based project like a sports stadium or arts festival should include all of the following EXCEPT&#10;A)Ancillary direct spending&#10;B)Added earnings of local employees&#10;C)Ticket revenue from non-local residents&#10;D)Parking revenue

Accepted Answer

Added earnings of local employees are considered an indirect effect of spending, reflecting the broader economic impact rather than direct spending associated with the event or project itself. Direct spending typically includes immediate expenditures such as ticket sales, parking, and ancillary spending by attendees.

Question 11

Among the main economic concepts used in economic impact analysis are&#8230;&#10;A)Supply, demand, and equilibrium&#10;B)Opportunity cost, net benefits, and market efficiency&#10;C)Direct spending, multipliers, and regional income&#10;D)All of the above

Accepted Answer

The answer of Among the main economic concepts used in...

Deck 11: Economic Impact Analysis