3.5. Leontief open model
Linear algebra has a vast range of applications in micro- and macroeconomics. The first model we are going to show is the one proposed by the Russian economist Wassily Leontief. This model is of paramount importance in the macroeconomic analysis, and it massively resorts to the sectorial double-entry tables. This way to look at macroeconomic aggregates had already been investigated before W. Leontief also by other economists, like—just to mention a few—François Quesnay (i.e., Tableau Economique) and Leon Walras (in his works dedicated to the general equilibrium theory).
The model attempts to capture the way an economy, this being based on many interrelated industries, has to work in order to reach the equilibrium, namely ...
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