Question

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An economy is based on three sectors, agriculture, manufacturing, and energy. Production of adollar’s worth of...

An economy is based on three sectors, agriculture, manufacturing, and energy. Production of adollar’s worth of agriculture requires inputs of $0.30 from agriculture, $ 0.30 frommanufacturing, and $0.30 from energy. Production of a dollar’s worth of manufacturing requires inputs of $0.30 from agriculture, $0.20 from manufacturing, and $0.20 from energy. Production of a dollar’s worth of energy requires inputs of $0.20 from agriculture, $0.30 frommanufacturing, and $0.30 from energy.

Find the output for each sector that is needed to satisfy a final demand of $67 billion foragriculture, $34 billion formanufacturing, and $14 billion for energy.

1) The output of the agricultural sector is ___ billion dollars

2) The output of the manufacturing sector is __ billion dollars

3) The output of the energy sector is __ billion dollars

Solutions

Expert Solution

a) Production of dollar's worth of agriculture requires inputs of $0.30 from agriculture, $0.3 from manufacturing and $0.3 from energy,

Thus to create $67 billion for agriculture we need $20.1 billion from Agriculture, $20.1 from manufcturing and $20.1 billion from energy.

b) Production of dollar's worth of manufactring requires inputs of $0.30 from agriculture, $0.20 from manufacturing and $0.20 from energy,

Thus to create $34 billion for agriculture we need $10.2 billion from Agriculture, $6.8 billion from manufcturing and $6.8 billion from energy.

c) Production of dollar's worth of energy requires inputs of $0.20 from agriculture, $0.30 from manufacturing and $0.30 from energy,

Thus to create $14 billion for agriculture we need $2.8 billion from Agriculture, $4.2 billion from manufcturing and $4.2 billion from energy.

1) The output of the agriculturral sector,

Output = $67 + $20.1 + $10.2 + $2.8

Output = $100.1 biliion

2) The output of the manufacturing sector,

Output = $34 + $20.1 + $6.8 + $4.2

Output = $65.1 biliion

3) The output of the energy sector,

Output = $14 + $20.1 + $6.8 + $4.2

Output = $45.1 biliion


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