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C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier?
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C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to...
Understanding the Foreign Trade Multiplier
The foreign trade multiplier measures the impact of foreign trade on a country's national income. It reflects how changes in exports and imports can influence overall economic activity.
Given Variables
- Consumption Function (C): C = 200 + 0.6Yd
- Investment (I): I = 40
- Tax Function (T): T = 10 + 0.2Y
- Government Payment (G): G = 50
- Exports (X): X = 30 + 0.2Y
- Imports (M): M = 40
Calculating Aggregate Demand
1. Aggregate Demand (AD) is represented as:
AD = C + I + G + X - M
2. Substituting Variables:
- C = 200 + 0.6Yd
- Yd (Disposable Income) = Y - T
- T = 10 + 0.2Y
- Therefore, Yd = Y - (10 + 0.2Y) = 0.8Y - 10
3. Consumption Function in terms of Y:
- C = 200 + 0.6(0.8Y - 10) = 200 + 0.48Y - 6 = 194 + 0.48Y
4. Aggregate Demand Formula:
AD = (194 + 0.48Y) + 40 + 50 + (30 + 0.2Y) - 40
AD = 274 + 0.68Y
Finding the Multiplier
The foreign trade multiplier (k) can be calculated using the formula:
k = 1 / (1 - MPC + MPM)
Where:
- MPC (Marginal Propensity to Consume) = 0.6
- MPM (Marginal Propensity to Import) = 0.2 (from the import function)
Substituting Values
k = 1 / (1 - 0.6 + 0.2) = 1 / 0.6 = 1.67
Conclusion
The foreign trade multiplier is 1.67, meaning that for every unit increase in foreign trade, the national income increases by approximately 1.67 units. This illustrates the significant role of trade in economic expansion.
The foreign trade multiplier measures the impact of foreign trade on a country's national income. It reflects how changes in exports and imports can influence overall economic activity.
Given Variables
- Consumption Function (C): C = 200 + 0.6Yd
- Investment (I): I = 40
- Tax Function (T): T = 10 + 0.2Y
- Government Payment (G): G = 50
- Exports (X): X = 30 + 0.2Y
- Imports (M): M = 40
Calculating Aggregate Demand
1. Aggregate Demand (AD) is represented as:
AD = C + I + G + X - M
2. Substituting Variables:
- C = 200 + 0.6Yd
- Yd (Disposable Income) = Y - T
- T = 10 + 0.2Y
- Therefore, Yd = Y - (10 + 0.2Y) = 0.8Y - 10
3. Consumption Function in terms of Y:
- C = 200 + 0.6(0.8Y - 10) = 200 + 0.48Y - 6 = 194 + 0.48Y
4. Aggregate Demand Formula:
AD = (194 + 0.48Y) + 40 + 50 + (30 + 0.2Y) - 40
AD = 274 + 0.68Y
Finding the Multiplier
The foreign trade multiplier (k) can be calculated using the formula:
k = 1 / (1 - MPC + MPM)
Where:
- MPC (Marginal Propensity to Consume) = 0.6
- MPM (Marginal Propensity to Import) = 0.2 (from the import function)
Substituting Values
k = 1 / (1 - 0.6 + 0.2) = 1 / 0.6 = 1.67
Conclusion
The foreign trade multiplier is 1.67, meaning that for every unit increase in foreign trade, the national income increases by approximately 1.67 units. This illustrates the significant role of trade in economic expansion.
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C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier?
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C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier?.
C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for C = 200 + 0.6 yd g is equal to 150 I is equal to do 40 tax is equal to 10 + 0.2y X payment equal to 50 export equal to 30 + 0.2y import is equal to 40 find f foreign trade multiplier?.
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