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The U.S. Tourism Boom

 
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PostPosted: Sun Aug 24, 2008 9:11 am    Post subject: The U.S. Tourism Boom Reply with quote

The U.S. economy will continue to outperform the E.U., Japanese, and Chinese economies. It's important to add both the production and consumption sides of an economy. Throughout the 2000s, the gains on the U.S. consumption side were enormous, while on the production side actual output was slightly below potential output. Unlike other economies, the U.S. has the tourism and export booms. The weaker dollar attracts many foreigners to the U.S. and discourages Americans from visiting abroad. The number of European tourists visiting the U.S. increased over 16% from last year. The multiplier effect from more tourists vacationing in the U.S. and fewer Americans vacationing abroad is a significant source of economic growth. Also, the U.S. export boom is increasing over 10% a year in real dollars.

From Wikipedia:

In economics, the multiplier effect refers to the idea that an initial spending rise can lead to an even greater increase in national income. In other words, an initial change in aggregate demand can cause a further change in aggregate output for the economy.

For example: a company spends $1 million to build a factory. The money does not disappear, but rather becomes wages to builders, revenue to suppliers etc. The builders will have higher disposable income as a result, so consumption, hence aggregate demand will rise as well. Say that all of these workers combined spend $2 million dollars in total, since there was an initial $1 million input which created a $2 million output, the multiplier is 2.

Another example is when a tourist visits somewhere they need to buy the plane ticket, catch a taxi from the airport to the hotel, book in at the hotel, eat at the restaurant and go to the movies or tourist destination. The taxi driver needs petrol (gasoline) for his cab, the hotel needs to hire the staff, the restaurant needs attendants and chefs, and the movies and tourist destinations need staff and cleaners.

http://www.tinet.ita.doc.gov/view/m-2008-I-001/table1.html
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