onsider the endogenous growth model, where the future period quantity of human capital is a function of current human capital, which drives production and thus growth. In the competitive equilibrium,C=Yand human capital accumulation is characterized as follows:

H=b(1u)H,(1)

whereHrepresents the future quantity of human capital,Hrepresents the current quantity of human capital,bcaptures the efficiency of human capital accumulation and (1u) denotes the fraction of time devoted to human capital accumulation.

(a)Find the growth rate of human capital. Be sure to show your work.

(b)Find the growth rate of consumption. Be sure to show your work.

(c)Use your answer from part (a) and (b), in addition to the fact thatC=Yin equlibrium, to explain why the economy will grow indefinitely whenb(1u)>1.

(d)The Canadian government subsidize education for it's citizens in an effort to increase the country's stock of human capital. What is the economic rational for this policy