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1. What are the differences between national income expenditure and regional income expenditure?

The first different is import. The regional imports is broader than national imports. The income term in finding the imports ( Mr = M + mYr ) is disposable income after tax where tax, t is regional tax rate. The equation also will be like this Yr = C + Ir + Gr + Xr + M 1- (c-m) (1-t) The way to find multiplier also will differ from national income kr = 1 1- (c-m) (1-t) The second different is the investment. Investment is part dependent on regional income rather than national is not primary dependent. The reason is local business confidence and the willingness of banks to provide loans to local business in order to improve flows of information between firm and customers and also improve the efficiency of local labour market. (through agglomeration externalities). The last different is in government expenditure. In national income, government expenditure is considered as exogenous (political issues). In regional, it is part dependent. It is inversely relationship between government expenditure and level of local regional income. In example low-income areas are eligible for public subsidies from regional policy funds. The high income will receive less public expenditure. The equation for regional income expenditure is Gr = G + gYr (1-t)

And the equation regional income expenditure is Yr = C + Ir + Gr + Xr - M 1- (c-m) (1-t) And the multiplier function is kr = 1

1- [(c-m) + (i- g)] (1-t) The different between equation the addition (i-g), marginal propensity to invest, reflects the total private local investment flow associated with local income, net of public expenditure withdrawals associated associate with increasing regional income

2. How can a Keynesian regional multiplier framework be made consistent with an economic base model? Even economic base multiplier and Keynesian multiplier model are different conceptually from each other but both of them still can be made compatible from each other. In order to see this, we have to separate the income expenditure multiplier Yr = __C+I+G+Xr-M_ _ 1-[(c-m)+(i-g) ](1-t) Yr = Xr + into an export base multiplier model C + I + G M__ 1-[(c-m)+(i-g)](1-t) + _B_ 1-n1. In the first term on the right-hand-side of the export which is quite similar to the economic

1-[(c-m)+(i-g) ](1-t) base model T= _No_ 1-n1

base multiplier, the equation only represent the export activity only, while the second term on the right-hand-side represent the other local activities only. This is quite similar to the economic base model where the first term in the right-hand-side represent the non-basic employment activity that consist of the economic condition interval to the local economy, while, the second term of the right-hand-side in the economic base model represent the basic employment activity that consist of the economic condition external to the local economy or demand outside of the local economy. Next, if we consider the changes in regional exports Xr the corresponding change in regional income Yr which can be represented as Yr = Xr_______ 1-[(c-m)+(i-g) ](1-t), is looked to be quite equivalent to the economic base model,

where, changes in the employment level in the basic sector, B, will affect the total regional employment, T which can be represented in the equation T = 1_ B 1-n . In the equation [(c-m)+(i-g)](1-t), it shows the income expenditure which

are quite similar to the coefficient n that reflect the expenditure in the basic-non-basic sector. C + I + G M equation in the Keynesian regional multiplier model represent the elements that will give the level of regional income which independent or without the regional export.

This seen to be quite similar to the No which in the economic base model that represent the level of the regional employment autonomous of the exports. Summarize :

Keynesian Regional Multiplier Model Yr = __C+I+G+Xr-M_ _ 1-[(c-m)+(i-g) ](1-t)

Economic Base Model

Yr =

Xr

C + I + G M__ T= _No_ 1-n1

+ _B_ 1-n1

1-[(c-m)+(i-g) ](1-t)

1-[(c-m)+(i-g)](1-t)

Yr =

Xr_______

T = 1-n

1_

1-[(c-m)+(i-g) ](1-t)

[(c-m)+(i-g)](1-t)

C+I+GM

T= _No_ 1-n1

+ _B_ 1-n1