Export & Import

Import Function
Import function expresses the level of spending
depending on three factors.
Y = national income
n = minimum import which is independent of Y; minimum
import when income is zero
m = marginal propensity to import

MPI is the ratio of change in import to change in national

income.
MPI is the slope of the import function.
Import Function

Import is a function of national income.

M = n + mY

where: M = import level

n = minimum import
Y = national income
m = marginal propensity to import
MPI(m) = Change in import
Change in Y
 Import Function
Y T Yd C C+I C+I+G C+I+G+X M
100 90 10 205 705 1105 1305 275
300 170 130 265 765 1165 1365 325

500 250 250 325 825 1225 1425 375

1000 450 550 475 975 1375 1575 500
1200 530 670 535 1035 1435 1635 550
2000 850 1150 775 1275 1675 1875 750
Consumption Function

Consumption is a function of disposable

income.
C = b + cYd
205= b + c (10)
MPC(c)=265-205/130-10=0.50
205=b + 0.50(10)
205=b +5
b=200
C= 200 +0 .50Yd
Investment Multiplier

INVESTMENT MULTIPLIER
-an income injection into the circular flow could generate
a much greater increase in income.
Investment Multiplier (K)

K = 1/1-MPC= 1/MPS
K=1/0.50
K=2
Tax Function

Tax is a function of national income.

T = s + tY
90= s + t (100)
MPT(t)=170-90/300-100=0.40
90=s+ 0.40(100)
90=s + 40
90-40=s
s=50
T = 50 +0.40Y