The consumption matrix C for the U.S economy in 1972 has the property that every entry in the matrix (1 – C)–1 Is nonzero (and positive).1 What does that say about the effect of raising the demand for the output of just one sector of the economy?

Problem 10E

As the Leontief production equation is , which is also written as

Now if has all entries positive , then since d is the final demand vector so it has positive entries. So by matrix multiplication increase if d any entry in d is increased, that is increases.

Hence if the demand in any sector increases, then the production in every sector will also increase.