Sometimes a City Will Argue That Having a Professional Sports

Multiple Choice

Sometimes a city will argue that having a professional sports franchise in the city will contribute to economic growth. The rationale for this statement is based on the multiplier effect. Suppose a city estimates that a professional sports franchise will create $45 million of additional income and that a person receiving a portion of this money will spend 80% and save 20%. Assuming the multiplier effect model is accurate, what is the net effect of the $45 million? Round to the nearest hundred thousand.

A) $450.0 million
B) $225.0 million
C) $281.3 million
D) $262.5 million
E) $356.3 million