The Leontief mannequin is a mathematical mannequin that economists use to research the interdependence of various sectors in an financial system. It’s based mostly 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 set by the demand for ultimate items and providers.
The Leontief mannequin is necessary 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 research the influence of commerce insurance policies, tax insurance policies, and authorities spending.
