Foreign Trade Multiplier | International Economics | Harpreet Kaur | Ecoholics

Foreign Trade Multiplier | Export multiplier | Import multiplier | International Economics

It may be defined as the amount by which the national income of a nation will be raised by a unit increase in domestic investment on exports. As exports increase, there is an increase in the income of all persons associated with export industries.

Export multiplier

The foreign trade multiplier also known as the export multiplier operates like the investment multiplier of Keynes. It may be defined as the amount by which the national income of a nation will be raised by a unit increase in domestic investment in exports.

What is the import multiplier?
The Multiplier with imports

In general, Marginal Propensity to Import (MPI) is % of extra $1 of income that is spent on imports, e.g. suppose MPC = 0.9 and MPI = 0.1. This implies that C = 0.9DI + some constant and IM = 0.1Y.


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