Answer to Question #49585 in Macroeconomics for Obinna

Question

Why is the multiplier effect of the Los Angeles Kings likely to be greater than the multiplier effect of the Winnipeg Jets?

Answer 1

Every time there is an injection of new demand into the circular flow there is likely to be a multiplier effect. This is because an injection of extra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from any new injection of spending. Because L.A. is a larger metropolitan area, the Los Angeles Kings will likely have to share more in local revenues with the league than the Winnipeg Jets.