How would a foreign trade multiplier behave if imports depended only on exchange rates? I was wandering if the amount of imports and exports in an economy depended only on the exchange rates then what would the foreign trade multiplier of this economy look like ?
If the net exports depended only on the exchange rate then there would not be any induced effect of net exports on income (as exports would not depend on income) hence, no multiplier effect. The other multipliers in economy would not be affected either.