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.
What will be an ideal response?
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.
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