ABSTRACT
The economic impacts of one sector on an economy are usually measured by an analytical tool called “input-output.” This model has been utilized to study the economic impact not only on the national level for the United States economy and others, but also on the regional level. As the input-output model has become very well-known among economists and policy analysts, there is no actual need to review all the technical elements of this model. However, some basic elements are explained to familiarize students with this valuable technique and to show how this model explains and predicts economic reality. The input-output model is not only a theory of production but is also an effective application of the Walrasian general equilibrium analysis. It is a theory of production because this model outlines a production function, a linear relation between input and output, for each sector in the economy.
