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The NYC Economy

May 16, 2010 • Businesses, Labor, Macroeconomic Measurement • 113 Views    No Comments

With “Law & Order” being canceled by NBC, the New York City economy will feel it. Of course actors are affected but also the caterers who feed them, the stores that sell them the lawyers’ clothing (Barney’s and Saks), and the hotels, the bars and the restaurants where TV crews hang out. People rented their homes, apartment houses provided their lobbies, and neighborhood stores supplied such law enforcement necessities as duct tape. With the credibility that “Law & Order” embodied, businesses and careers were launched by the program. 

Similarly, “Law & Order” was a launching pad for the GDP. Every time a business invests in land, labor, and capital, it is initiating a ripple of spending. Called the multiplier, the ripple results in a magnified impact upon the total spending on new goods and services throughout the economy.

The Economic Lesson

Specifically defined, the investment multiplier is the number that compares the amount of an initial investment to the total that ultimately is added to the GDP because of the ripple of spending that is created. A multiplier of 3 would mean that a purchase of a $1000 camera for “Law & Order” could result in $3000 being added to the GDP once all of the transactions that relate to the camera are completed.

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