• Intermediate input dynamics: Buying goods to make more goods

    2 monthes ago - By FRED

    When a firm manufactures a good, the production uses not only labor and physical capital, but also intermediate goods and materials produced “upstream” in the production network. For example, when an automaker produces a car, it needs to purchase steel, glass, electronic devices, and more from other companies. The graph above shows the ratio of the costs of intermediate goods to total revenue for all U.S. industries. We see that the whole economy relies heavily on the production network, as the revenue share of intermediate inputs is above 40% on average. Also, the material share isn't...
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