Export Multiplier

Export Multiplier

Export Multiplier, the net effect on a country's level of national income of an increase in its receipts from exports arising out of a shift in world demand from the goods of other countries. In the simplest case, if two countries only, A and B, are considered and a shift occurs in 'world' demand from B's to A's goods, the total increase in spending and income in A will be the sum of (a) the initial increase in export spending, plus (b) any induced domestic consumption spending, minus (c) any induced spending on imports from B, plus any further 'induced spending' by B on A's goods arising out of (c). The size of (b) will depend on A's marginal propensities to consume and save; that of (c) will depend on as marginal propensity to import; that of (d) will depend on both A's and B's marginal propensities to consume and save and B's marginal propensity to import.

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