ECN 722 Chapter Notes - Chapter 10: Government Spending, Opportunity Cost, Canadian Olympic Committee
6 May 2019
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Multiplier - number by which the change in investment must be multiplied to calculate the resulting change in income. Crowd out - no change in output in spite of government spending in a fully employed economy. Substitution effect - what happens when consumers simply reduce their expenditure on other items to spend money on sports. Crowding out effect - what happens when the crowds associated with a sporting event lead other people to avoid the event, thus reducing its economic impact. Leakage effect - what happens when professional athletes employed by sports teams tend to live elsewhere, with spending then leaking outside the city hosting the team. Despite the substantial profits earned by the sports industry, there is continued public demand for subsidies. Government spending has stimulus effects on the economy. For an economy below full-employment, increased government spending will increase employment and incomes.
