The Simple Expenditure Model with Trade: How Should We Model Imports?

Robert Cherry

The Journal of Economic Education, 2001, vol. 32, issue 1, 53-57

Abstract: Imports are modeled as a fixed proportion of spending rather than as a function of total or disposable income. With this formulation, the import component of spending shifts must be netted out in order to predict the initial autonomous change in domestic spending. In addition, the formulation should provide a clearer understanding than current formulations of how leakages influence the multiplier process.

Date: 2001
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DOI: 10.1080/00220480109595170

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