DECA Sports and Entertainment Marketing Practice Exam

What is the term that describes the portion of money spent by visitors on local goods and services that circulates back into the local economy?

1. Multiplier effect

2. Fiscal policy

3. Economic downturn

4. Supply chain

The correct answer is: Multiplier effect

The term that describes the portion of money spent by visitors on local goods and services that circulates back into the local economy is the multiplier effect. This concept refers to the way in which an initial amount of spending, often from tourists, leads to increased income for local businesses, which then spend that income in the community, creating a ripple effect. When visitors spend money on local attractions, food, and accommodations, those expenditures generate income for local employees and businesses. These recipients then spend their earnings on other local services and products, thus multiplying the initial impact of the original spending. This cyclical process enhances the overall economic health of the area, fostering growth and potentially leading to job creation. The other terms do not align with this specific economic phenomenon. Fiscal policy relates to government spending and taxation decisions, an economic downturn indicates a period of negative economic growth, and supply chain refers to the network involved in producing and distributing goods but does not specifically highlight the local economic impact of visitor spending.