Ateneo de Manila University

Loyola Schools
Economics 115

Problem Set 1

Answer all items. Show complete solutions.

 
a11 0 0 0
 0 a22 0 0
1. Let A =  , where aij ∈ R \ {0} for i, j = 1, 2, 3, 4.
0 0 a33 0 
0 0 0 a44

(a) Show that A is nonsingular.

(b) Find the inverse of A.

2. Find the real symmetric matrix that generates the quadratic form

q(x) = 3x21 + 2x22 + x23 − 2x1 x2 − 2x2 x3

 
1 4
3. Find the eigenvalues of A = . Give at least one eigenvector for each of the
3 5
eigenvalues.
 
1 0 1 1 1
1 2 3 4 5 
 
4. Find α such that A =   2 0 1 2 1  is nonsingular.

0 0 0 1 0 
1 0 1 3 α
 
1 2 1 0
3 2 0 5
5. Let A = 4 7 1 5. Determine if A is nonsingular. If so, find the elements of its


0 3 3 1
inverse with indices (4, 2) and (3, 3).

6. Suppose we want to find a linear function that fits or approximates a set of data points
{(x1 , y2 ), (x2 , y2 ), . . . , (xn , yn )}. If there exists such a function, then

y1 = a + bx1
y2 = a + bx2
..
.
yn = a + bxn

To find the said linear function, we need to estimate the parameters a, b ∈ R. We can

1
 express the system of equations above as
   
y1 1 x1
 y2  1 x2   
 a
 ..  =  .. .. 
  
 .  . .  b
yn 1 xn
yn×1 = Xn×2 β2×1
We solve for the parameters by reducing the n×2 matrix X to a 2×2 matrix as follows
yn×1 = Xn×2 β2×1
T T
Xn×2 yn×1 = Xn×2 Xn×2 β2×1
z2×1 = H2×2 β2×1
where z = X T y, H = X T X. The solution is given by
β = H −1 z (? ? ?)

Consider the following data points. In Table 1, consumption is determined by the

amount of income (GDP).

Table 1: GDP and household consumption

GDP Consumption
44.3 33.4
48.7 35.0
47.3 34.6
55.0 39.9
44.5 34.2
41.3 30.4
42.0 32.1
51.6 38.0
43.6 34.0
47.5 33.9

(a) Make a scatter plot of Table 1 data points (GDP, Consumption).

(b) Use (? ? ?) to find the line that represents the relationship between GDP and
consumption spending.

(c) Plot the line you obtain in (b) with the scatter plot in (a).

7. Consider the following input-output table (Table 2).

If final demand for services increases by 10 percent, what is the resulting change in
output of economic sectors? (You may use MS Excel or any software to compute the
Leontief inverse. Please attach your file to your answers.)

2
 Table 2: 2012 Input-output table (in million Php)
AGRI IND SER Intermediate Demand Final Demand
AGRI 264,254 788,566 184,157 1,236,989 908,334
IND 135,084 2,857,462 1,596,058 4588627 3,809,016
SER 252,488 1,520,452 3,404,649 5,177,594 5,957,470
Total Intermediate Consumption 651,826 5,166,511 5,184,869 11,003,208 10,674,814
Compensation of Employees 632,709 762,772 2,363,099 3,758,582
Consumption of Fixed Capital 114,081 309,358 519,588 943,029
Taxes less Subsidies on Production 55,836 83,901 285,433 425,169
Operating Surplus 690,866 2,075,096 2,782,071 5,548,033
Total Primary Inputs 1,493,495 3,231,125 5,950,194 10,674,813
Total Inputs 2,145,320 8,397,638 11,135,062 21,678,020