Economic Problem: There Are 5 Questions To Answer

Economic Problem
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March 10, 2017
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1 The I-O table shows the interdependency of national sectors, such as the input needed by a particular sector, and its own output that is, in turn, as used by another. From this, the prominence of one sector or industry could be seen based on the amount of inputs that it needs from others to operate, and the output that it produces. Attached below is an example of a national I-O table. In this example the prominence of Industry A could be seen from the high total Gross output relative to its total inputs and the outputs of the other industries given.
2 Since the I-O table shows the interdependence of each sector with one another based on the relationships between inputs and outputs, the dependence of the whole economy on a specific industry (e.g. mining) could be seen depending on how much of its outputs are needed by the other sectors.
3 The I-O table can show an industry’s potential for growth (and to stimulate growth), depending on the operating surplus of each sector. Growth usually happens when the sectors produce a lot of surplus (that is being imported both domestically and internationally) with the least input possible.
4 Since the I-O table shows the amount of imports as well as the final demands and outputs from institutions within the domestic economy and with the rest of the world, the current and potential markets could gleaned based on the amount and quantity of multipliers.
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5 Multipliers refer to the number/quantity in which the expenditure’s return exceeds the initial amount of the expenditure itself. The main difference between Type I and Type II multipliers is that Type I multipliers do not cover induced effect, while Type II does. Type I multipliers only cover direct and indirect effects on the supply chain. Aside from this, type I multipliers are assume that households are exogenous, while Type II does not.
6 In order to calculate for Type I multipliers, both the direct and indirect sales should be summed up, then divided by the direct sales. As for Type II multipliers, the sales equation (direct and indirect) should be summed-up with the ‘induced sales’, then divided by the total direct sales produced. The main reason why type-II multipliers are easier to compute is because it assumes that household sector is “endogenous” while Type I multipliers considers the same sector as ‘exogenous’, and thus, “the direct effect on households of a change in a final demand is assumed to be the level if final demand for the household commodity” CITATION Van11 \l 1033 (Van Kooten, 2011). And, by the virtue of being endogenous, Type II multipliers (more specifically, induced sales) are more predictable that those of Type I multipliers. This predictive characteristic of Type II multipliers make it easier to compute than Type I multipliers.
7 The main reason why multipliers generated from a regional I-O table is smaller than their national counterparts is because regional economies and industries are dependent on external and much larger territories trough trade. In other words, the ability of regions to supply themselves without the need to trade wit...