Discussion
Which of the following are not associated with the Leontief's Static Model ?
I. Final demand is a stochastic vector.
II. Reciprocal of the Perron-Frobinius root is the maximum growth rate.
III. Input coefficients are the fixed technological parameters.
IV. \((I - A - RB)^{-1} WL = P\)
Select the correct code from the following :
Answer: D
The statements not associated with Leontief's static model are I (final demand is a stochastic vector), II (the reciprocal of the Perron-Frobenius root is the maximum growth rate) and IV (the expression with the matrix RB, which belongs to a dynamic model with capital coefficients). So the code is I, II, IV, option D.
Statement III, that input coefficients are fixed technological parameters, is the basic assumption of the static model, so options A, B and C, which include III, are wrong. In the static model the final demand is a given (exogenous) vector, not a random one.
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