Foreign trade multiplier

The foreign trade multiplier also known as export multiplier operates like the investment multiplier of Keynes. It may be defined as the amount by which national income of a nation will be raised by a unit increase in domestic investment on exports. As exports increase there is an increase in the income of all persons associated with the exports industries.These in turn create demand for goods.But this is dependent upon their marginal propensity to save (MPS)and marginal propensity to import (MPM). The smaller these two propensities are,the larger will be the value of multiplier and vice versa.