The Nottinghamshire Research Observatory in England calculated that students who attend Nottingham Technical University spend about £2,760 each in the local economy for a total of £50.45 million. In total, the impact of their spending on the local economy is £63 million. Calculate the size of the student spending multiplier.

Expert Answers

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We are given the following:

  • Nottingham Technical University students spend £2,760 each
  • Total Spending = £50.45 million
  • Impact on the economy = £63 million

We must find the value of spending multiplier (m).

We know that

(multiplier) * (total spending) = impact on the economy.

Thus, substituting the given values, we get

`m * 50.45 = 63`

`m = 63/50.45`

`m = 1.2487 ~~ 1.25`.

Thus, the size of the student spending multiplier = 1.25.

This multiplier shows us that for every pound of student spending, the impact on the economy will be 1.25 times more.

For instance, if spending rises by £10, then the total impact of that rise on the economy will be `10*1.25 = £12.5` .

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