The Leontief mannequin is a mathematical mannequin that economists use to investigate the interdependence of various sectors in an financial system. It’s primarily based on the concept the output of 1 sector is used as enter for different sectors, and that the whole output of the financial system is decided by the demand for remaining items and companies.
The Leontief mannequin is essential as a result of it permits economists to grasp how modifications in a single sector of the financial system can have an effect on different sectors. This info can be utilized to make coverage choices that promote financial progress and stability. For instance, the Leontief mannequin can be utilized to investigate the impression of commerce insurance policies, tax insurance policies, and authorities spending.