Introduction

The input-output table below (Table 1) lists several sectors of an economy and dollar values for how much goods from each sector were used as production inputs (columns) and as production outputs (rows) in the economy. This table is similar to Table 3.1 in Chapter 3 of the Taylor and Lybbert text.

The multiplier matrix (Table 2 below), then, will tell how much each sector has to produce in order to satisfy its own final demand as well as demand for its good as intermediate inputs for production processes. The entries in a Leontief multiplier matrix are the outputs each row (sector) must produce in order to satisfy a $1 increase in the column’s (sector’s) final demand. This table is similar to part (a) of Table 3.2 in the text.

Chapter 3’s Appendix walks you through how Table 3.1 was transformed into Table 3.2—just 3 steps. Use these same 3 steps to transform Table 1 in this assignment and fill in the cells in Table 2. For the last step, you will need to find the inverse of your matrix. I have attached instructions for doing that in Excel. I recommend you use Excel to find your matrix and then copy and paste the matrix into a Word document for submission.

Table 1. Production input-output table

Production Sectors	Agriculture	Industry	Services
Agriculture	300	75	21
Industry	540	350	90
Services	105	150	55
Factors+ Imports	450	850	401
TOTAL	1395	1425	567

Lab Instructions

1. Find the Leontief Multiplier Matrix for the economy represented in Table 1. Your table should have the following rows and columns. (3 points)

Table 2. Leontief Multiplier Matrix

Production Sectors	Agriculture	Industry	Services
Agriculture
Industry
Services

2. Use your Leontief matrix from question 1 to determine how much additional output the Agricultural sector would need to produce if the Service sector saw an increase in final demand of $300. (1 point. If you are unsure about your answer to question 1, you may still receive credit for this question by describing how you should use the matrix above to find this answer.)

Graded out of 10 points:

0 = nothing turned in by deadline or shows very little thought or effort.

5 = lab submitted by deadline, shows some effort, but fails to follow instructions or is totally misguided.

6-10 = lab submitted by deadline, follows instructions, and shows considerable effort. Points assigned as indicated above.

Submit your lab write-up to this drop box in either a Microsoft Word file or a pdf. If I cannot read it, I cannot grade it.

Answer rating: 100% (QA)

Solution Production sector A... View the full answer