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”

6. 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