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10) We want to compare the overall multiplier of two neighboring cities: -- Atlanta, a highly industrialized & financial economy, and -- Savanah, an economy
10) We want to compare the overall multiplier of two neighboring cities: -- "Atlanta", a highly industrialized & financial economy, and -- "Savanah", an economy that has experienced recent contraction, whose tax base is increasing to make up for the city's budget shortfalls. Calculate the multiplier for each city's economy, then select the statement below the chart that is most true. Atlanta Savanah Individual Propensity to Save: 5% 7% Local Tax Rate: 5% 8.5% Balance of Imports over Exports: 5% 4% a) Atlanta's multiplier is 6+, and Savanah's multiplier is 5+, indicating that the dollar in Atlanta goes farther in expanding the local economy, b) Savanah's multiplier is lower, which generates increased city tax collections, C) Savanah's multiplier is higher, which may lead to long-term inflation
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