If a tourist event has a large multiplier effect, what does that imply?

• A. It leads to larger indirect spending due to successive rounds
• B. It creates minimal indirect spending
• C. It only affects direct spending
• D. It reduces local tax revenue

Answer: (A)

A large multiplier means the initial tourist spending triggers a big ripple of further spending in the local economy. As tourists spend, money flows to local businesses and workers who then spend their income again on local goods and services. Each round of re-spending generates more economic activity, so indirect spending is much larger than the initial outlay. It’s not about minimal indirect spending or only direct spending, and while taxes can rise with higher activity, the key takeaway is the expansive ripple effect through successive rounds of local spending.