Question

According to Alaskan state economist Mark Edwards, the multiplier effect of Alaska’s trade with Japan is such that for every $1 billion exported from Alaska to Japan another $600million is added to the state’s economy.Matt Volz, “Trade Officials Hopeful for JapaneseRecovery,”Associated Press and Local Wire June 22, 2004, BC cycle.Calculate the size of the export multiplier

Answer 1

Export Multiplier

$Foreign\ trade=Exports=X$

$Foreign \ trade\ multiplier(K_f)=\frac{\Delta Y}{\Delta X}$

$\Delta Y=600$

$\Delta X=1000$

$K_f=\frac{600}{1000}=0.6$

Export Multiplier$=0.6$