2.4 Consider an economy organized into three industries: lumber and wood products, paper and allied products, and machinery and transportation equipment. A consulting firm estimates that last year the lumber industry had an output valued at $50 (assume all monetary values are in units of $100,000), 5 percent of which it consumed itself; 70 percent was consumed by final demand; 20 percent by the paper and allied products industry; 5 percent by the equipment industry. The equipment industry consumed 15 percent of its own products, out of a total of $100; 25 percent went to final demand; 30 percent to the lumber industry; 30 percent to the paper and allied products industry. Finally, the paper and allied products industry produced $50, of which it consumed 64 Foundations of Input-Output Analysis 10 percent; 80 percent went to final demand; 5 percent went to the lumber industry; and 5 percent to the equipment industry. a. Construct the input-output transactions matrix for this economy on the basis of these estimates from last year's data. Find the corresponding matrix of technical coefficients, and show that the Hawkins-Simon conditions are satisfied. b. Find the Leontief inverse for this economy. c. A recession in the economy this year is reflected in decreased final demands, reflected in the following table: Industry Lumber & Wood Products Machinery & Transportation Equipment Paper & Allied Products % Decrease in Final Demand 25 10 5 d. What would be the total production of all industries required to supply this year's decreased final demand? Compute the value-added and intermediate output vectors for the new transactions table.