Question

13. Suppose that you have been given the following data on the transactions within a city's economy a. Fil in the transactions table b. Will this city have a larger or a smaller export multiplier than the city with the transactions listed in Table 6-2? Explain. Producers Wire Local Total Inputs Computer Households Exports Producers Merchants Firms 0 $350 $300 $2,000 Computers Wire 600 1,000 500 Local 2,500 0 Labor 1,000 600 2,000 3,600 300 1,650 Imports Total 2,000 3,600 TABLE 6-2 Transactions Table from Input-Output Study Producers Wire Local Total Inputs Computer Households Exports Producers Merchants Firms $ 180 $300 $ 150 $2,000 Computers $1,370 Wire $ 400 0 600 1,000 Local 2,500 2,500 Labor 1,000 600 2,000 3,600 0 Imports 600 100 350 920 1,970 Total $2,000 $1,000 $2,500 $3,600 $1,970

Answer 1

a)

ComputerFi Wire Local 6.1 Inputs Producers Merchants Households Exports Total ms 100 S 2,000 Computers S S 350 S 200 S 300 S 500 S Wire S S S 600 S 1,000 Local S S S S 2,500 S S 2,500 600 S Labour 1,000 S 2,000 S S 3,600 50 S 300 S Imports S 500 S 800 1,650 3,600 S 2,500 S 1,650 S Total 2,000 S 1,000 S 10,750

b)

6.1 has marginal propensity to export as 1650/10750 = 0.15

Export multiplier is = 1/0.15 = 6.5

Computer Wire Household Local 6.2 Imputs Producers Merchants Total Firms Exports S 180 S 1,370 S 2,000 600 S 1,000 S 2,500 S 3,600 S 1,970 S 2,000 S 1,000 2,500 $ 3,600 S 1,970 $ 11,070 150 S Computers $ S 300 S S Wire 400 S S S 2,500 Local S S S 600 S 2,000 S Labour S 1,000 S S 600 $ 350 S Imports 100 S 920 C Total

6.1 has marginal propensity to export as 1970/11070 = 0.18

Export multiplier is = 1/0.18 = 5.6

So, 6.1 has LARGER EXPORT MULTIPLIER.