ECON 562SECOND PROBLEM SET:

An economy has the following total transactions (or total requirements) input-output matrix:

AgricultureManufact.EnergyServices

Agriculture1.400.300.400.40

Manufacturing0.401.500.500.60

Energy0.300.701.200.40

Services0.500.500.401.30

(a)If the final demand for manufacturing increases by $ 60 billion, what will be the increase in total production in each industry? In the economy as a whole?

Ag=

Manufacture=

Energy=

Services=

Increase of

(b)Calculate the industry multipliers for agriculture and services.

3. A firm is producing a product using only labor and physical capital. The price of labor (wage rate) is $ 20/hour, and the cost of capital is $ 60/hour. If the marginal product of labor is 300 units an hour, what must be the marginal product of capital if the firm is a profit maximizer?