Suppose your community is considering using public money to build a new sports stadium for the team that is already in the community but is likely to leave without a new stadium. Suppose you are watching a news broadcast in which the supporters are saying that it will enhance economic activity because of the increase in restaurant activity that will occur around the new stadium. Now suppose you hear that an independent economist is going to appear during the next segment. It is likely she will say
A. there will be no new economic activity created.
B. it may be a short-term cost, but in the long term, it will be worthwhile.
C. the economic activity created in the area will make it worth the investment.
D. there will be no new economic activity created in net because the same amount of money will be spent in the city whether or not there is a team. It will simply substitute from the game to something else.
Answer: D
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A key element of the classical growth theory is that
A) low taxes promote economic growth. B) an increase in population leads to increase in labor supply and a decline in real GDP per person. C) economic growth can be sustained as long as government intervention does not occur. D) increases in technology drive economic growth. E) market forces drive economic growth.
What is the Nash equilibrium of the game?
a. Low, Low b. Low, High c. High, Low d. High, High