When a community opens a large shopping mall, it often expects a boost to the local economy, and in fact a large amou...

Olivia on August 24, 2020

Why is B incorrect?

Please explain

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Shunhe on August 25, 2020

Hi @odsimkins,

Thanks for the question! So let’s goo through this stimulus first. We’re told that when a community opens a big shopping mall, there’s supposed to be a boost to the local economy, presumably because there’s economic activity going on in these malls. But the increase in the local economy is smaller than the total amount of economic activity that goes on in the mall.

So now we’re asked to explain the discrepancy, or resolve the paradox. What is the paradox? Well, it’s that these money amounts aren’t the same. Normally, you’d think if someone’s spending $10 at the mall, they’re boosting the local economy by $10. So we need something to explain that.

Now let’s take a look at (B), which tells us that most of the money spent in a large shopping mall is spent by tourists drawn specifically by the mall and who wouldn’t have visited the community if the mall wasn’t built. Well, this just tells us why the mall would help boost the local economy. It brings in people who wouldn’t otherwise have come, and they spend their money there. But it doesn’t help explain the difference, it doesn’t give us insight into why the economic activity at the mall is greater than the increase in the local economy. So (B) doesn’t resolve the paradox and is wrong.

Hope this helps! Feel free to ask any other questions that you might have.