Answer all of the questions below using a one-period general equilibrium model with no frictions or distorting taxes. When commenting on the equilibrium effects for each problem, consider the following:

• Describe and illustrate the general equilibrium outcome on all endogenous variables, including consumption, real GDP, real wage, leisure, and employment.

• Describe the effect on the marginal utility of consumption, the marginal utility of leisure, the marginal product of labor, and the marginal product of capital.

• If income and substitution effects work in opposite directions, assume that the substitution effect dominates.

1. Suppose a past national investment in the quality of K-12 and post-secondary education leads to a more productive workforce. Describe and illustrate the equilibrium effects in the one-period socially optimal general equilibrium model.

2. Suppose the government increases its expenditure on public goods.

3. Describe and illustrate the equilibrium effects in the one-period socially optimal general equi- librium model.

4. Comment on whether you think this was a good or bad policy. Use the model outcomes or shortcomings of the model to defend your answer.