Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I would like to know how to solve this question to compare with my answer. Thank you :) Question 6 [20 pts] Consider the human

I would like to know how to solve this question to compare with my answer. Thank you :)

image text in transcribed
Question 6 [20 pts] Consider the human capital growth model with the representative consumer who lives in two periods (0, 1). The efciency parameter of human capital accumulation technology is b = 4.5. The total productivity factor is given by z = 3 in period 0 and z = 1.5 in period 1. Denote by H; the human capital accumulated in period t, and by u the time spent working in period t. Assume the initial human capital is H0 = 3. 1. Compute Co, 01 as functions of u. [05 pts] 2. Assume the consumer is willing to maximize the lifetime utility function, lI1(C'1) L =l U I1(C'0)+ 1+7. where r = 0.1 is the real interest rate. Give the optimal value of u? [10 pts] Remark: You are NOT allowed to use an online solver when answering this question. 3. Assume some massive investment in the education system made by the government increases (2 to 5. How will this policy affect the optimal u of the consumer? Quantify the implication of this policy for the long-term consumption growth. [05pts]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Levelling What's Next After Globalization

Authors: Michael O'Sullivan

1st Edition

1541724089, 9781541724082

More Books

Students also viewed these Economics questions

Question

How does innovation impact on design?

Answered: 1 week ago