Two sectors of any country economy are (1) lumber and wood products and (2) paper and allied products. In 1998 the input-output table involving these two sectors was as follows (all figures are in millions of dollars). $$\begin{array} { | r | c | c | }
\hline \text { To } & \text { Wood } & \text { Paper } \
\hline \text { From Wood } & 36,000 & 7,000 \
\hline \text { Paper } & 100 & 17,000 \
\hline \text { Total Output } & 120,000 & 120,000 \
\hline
\end{array}$$ If external demand for lumber and wood products rises by $14,000 million and external demand for paper and allied products rises by $22,000 million, what increase in output of these two sectors is necessary Round answers to two significant digits.

Question

Two sectors of any country economy are (1) lumber and wood products and (2) paper and allied products. In 1998 the input-output table involving these two sectors was as follows (all figures are in millions of dollars). $$\begin{array} { | r | c | c | } 
\hline \text { To } & \text { Wood } & \text { Paper } \
\hline \text { From Wood } & 36,000 & 7,000 \
\hline \text { Paper } & 100 & 17,000 \
\hline \text { Total Output } & 120,000 & 120,000 \
\hline
\end{array}$$  If external demand for lumber and wood products rises by $14,000 million and external demand for paper and allied products rises by $22,000 million, what increase in output of these two sectors is necessary  Round answers to two significant digits.

Quizplus · Accepted Answer

To solve this, we use the input-output model of the economy. The increase in external demand requires an increase in total output, which also increases the inter-sectoral demand. The calculation involves solving a system of linear equations based on the input-output table and the new external demand.

Two Sectors of Any Country Economy Are (1) Lumber and Wood