Economics|ECON2025|Campion College

7. (HW) It has just been announced that the 2016 games of the modern Olympiad will be held in Rio de Janiero, Brazil. The Brazilian government is excited and views such an opportunity as a real means to boost the Gross Domestic Product (GDP) and provide a vast employment opportunities of nationals. Despite stating this in black and white, Dilma Vana Rousseff, the president of republic is unable to convince the populace and the opposition socialist party who asks for her to conduct an in-depth investigation in noting the impact on the consumption of the city’s residents. Her Excellency Dilma Vana Rousseff, hires you and at the end of the study; it is found that the marginal propensity to consume is 0.25. From this do the following calculations and provide a concise evaluation/interpretation: (a) The simple multiplier (10 marks) (b) If a new stadium is built adding a further 120 million USD, what impact is expected on the economy based on the multiplier calculated above? (15 marks) (c) If the marginal propensity to import is found to be 0.15. How does this affect the multiplier and state the impact on the economy? (10 marks) (d) If the residents of Rio de Janiero spend an additional 65 cents out of every dollar what effect would this have on the multiplier and on the economy as well? (15 marks)