Consider an economy in which the government employs teachers to provide education services to the public which are funded entirely by taxes. These government employees (i.e. doctors) earn salaries for this work. Assume that a pandemic starts which causes many parents not to send their children to school. Assume that enrollment drops by 50%. The number of teachers as well as their pay (i.e. salaries) stay the same during the same period.

(a) Using the expenditure approach, determine how the GDP changes over time? Ex plain.

(b) Now suppose that all education services are provided by the private sector. Private schools charge each student a fee or tuition. Assume that the same pandemic hits, and half of parents choose not to send their children to school. The number of teach ers as well as their pay (i.e. salaries) stay the same during the same period. Using the expenditure approach, determine how the GDP changes over time? Explain, and contrast your answer with the part (1a).

(c) Consider the following additional information. Children who are not sent to school by their parents receive education from parents at home, i.e. they get home schooled. Assume that the quality of home-schooling is as high as that of regular schools. For simplicity, assume that home-schooling does not imply a time cost to parents. What are the welfare implications of this for both (1a) and (1b)? Does the change in GDP reflect the changes in welfare accurately? Explain.