Question

Let’s add some realism to the exercise and include the effects of taxes and import leakages on the multiplier. Assume, taxes are 0.30 and imports are 0.35. What is the change in GDP when you include these values in your multiplier calculation?

Answer 1

The tax multiplier measures the increase in total GDP with response to the lowering tax rates.
Tax multiplier = MPC/ (1-MPC)
The export multiplier measures the increase in the level of GDP due to the increasing demand for the exports.  
Foreign trade multiplier = 1/ (1-MPC) + m. Where m is the level of import.
Assume that the taxes are 0.30, this shows 30 rupees will added t the taxes with a rise in GDP to 100 rupees. This is an important leakage in the economy. The 30 rupees treat as tax rates among the 1000 rupees.
If the foreign trade multiplier is 0.35, if the total amount of GDP is 100 rupees, the gain from export is 35 rupees. Multiplier is an important measure to find the change in national output with respect to the change in tax rates and export rates. Export is an injection to the total GDP and tax rates make burden on consumers. If the tax rate increased by one unit, the output will increased by multiplier unit.