1.6 EXERCISES 1. Suppose an economy has only two sectors, Goods and Ser- vices. Each year, Goods sells 80% of its output to Services and keeps the rest, while Services sells 70% of its output to Goods and retains the rest. Find equilibrium prices for the annual outputs of the Goods and Services sectors that make each sector's income match its expenditures. Goods .8 .7 Services 3 2. Find another set of equilibrium prices for the economy in Example 1. Suppose the same economy used Japanese yen instead of dollars to measure the value of the various sec- tors' outputs. Would this change the problem in any way? Discuss. 3. Consider an economy with three sectors, Chemicals & Met- als, Fuels & Power, and Machinery. Chemicals sells 30% of its output to Fuels and 50% to Machinery and retains the rest. Fuels sells 80% of its output to Chemicals and 10% the rest. Machinery sells 40% to 6 7. 8. C
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Introduction
Good sector:
The "Goods sector" refers to the part of an economy that produces tangible products such as clothing, food, and electronics. These products are generally tangible, meaning that they can be physically touched, and often have a defined life span. Examples of industries in the goods sector include agriculture, manufacturing, and construction. The output of the goods sector is often referred to as "goods and services," or simply "goods.
Service sector:
The service sector is a classification of economic activity that includes all industries that produce intangible goods and services, as opposed to tangible goods. Examples of industries in the service sector include finance, healthcare, retail, transportation, and hospitality. The service sector is considered an important indicator of an economy's overall health and is often a major source of employment and income.
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