Short Quiz1. Calculate the Real GDP of Travistan if GDP is grew

by 5% in 2012.2011 CPI: $502012 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)

• Monetary change • Francisco deposits $100 into a

CD• Reserve Requirement: 5%

• How much new money will his deposit create?

Glendale, Arizona• Fiscal policy: increase spending by $500 million• MPC: .9

• How much economic growth could we expect?• “Leakage”

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 million1. 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