Just answer the questions.
Question 2Giblin’s multiplier
L F Giblin is often named as one of the inventors of ‘the multiplier’. In his 1930 inaugural lecturehe wishes to analyse the macroeconomic consequences of an exogenous fall in export income to a woolgrower of £900. Giblin argues as follows:
“A woolgrower receives £900 less income than his average. He has, therefore, £900 less to spend. He will reduce his expenditure on those goods and services he can best spare. One-third of total consumption is on imports, and we may assume that one-third of his reduction of expenditure, £300, will be for such goods. The remainder will be for domestically-produced goods and services. Let us suppose he puts off a fencer engaged in improving his property at a cost of £200 per annum; saves £200 on clothing, putting a tailor out of work; and saves another £200 in pleasure-travelling, putting a motor-mechanic or driver out of work who was previously earning that sum. There is no other income available for employing the fencer, tailor and motor-mechanic, and there is, therefore, a further loss of income of £600, two-thirds of the original £900. This £600 of income was also being spent by the fencer, tailor and motor-mechanic, one-third, or £200, on imports and two-thirds, or £400, on the landlord and butcher and boot-maker and other Australian workmen. So that there will be a further loss of Australian income of £400. And so on, until, in the end, there has been a reduction in imports of £900 in all, and a reduction of Australian income of £2,700, or three times the direct shortage of income of the wool-grower” (Giblin, 1930, p 3f).
Two questions: (In answering these questions assume that G = 0 and that there are no taxes.)
(a) Written as an equation, how can we write Giblin’s formula or ‘expression’ for the (export) multiplier?
(b) What is the ‘size’ of Giblin’s multiplier and what values is Giblin assuming for the relevant ‘propensities’ or ‘components’ of the (export) multiplier? (Show workings)
END OF QUESTIONS
 L.F. Giblin, Australia, 1930: An inaugural lecture, Melbourne University Press in association with Macmillan, 1930. I don’t believe I have left out any relevant information but if you do want to find the text of the whole thing there is a pdf copy in the LMS folder for the subject under Assignment 1.
 The symbol £ is for ‘pounds’. Before adopting dollars and cents in 1966 Australia used pounds, shillings and pence as its currency.
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