Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question, I can't solve this one, hope someone can help. Consider the human capital growth model with the representative consumer who lives in two periods

Question, I can't solve this one, hope someone can help.

image text in transcribed
Consider the human capital growth model with the representative consumer who lives in two periods (0, 1). The efficiency parameter of human capital accumulation technology is b = 4.5. The total productivity factor is given by = = 3 in period 0 and z = 1.5 in period 1. Denote by Ht the human capital accumulated in period t, and by u the time spent working in period t. Assume the initial human capital is Ho = 3. 1. Compute Co. Ci as functions of u. 2. Assume the consumer is willing to maximize the lifetime utility function, LU = In(Co) + In(C1) 1tr where r = 0.1 is the real interest rate. Give the optimal value of u? [10 pts] 3. Assume some massive investment in the education system made by the government increases b 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

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_2

Step: 3

blur-text-image_3

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

Principles Of Macroeconomics

Authors: N Gregory Mankiw

8th Edition

1305971507, 9781305971509

More Books

Students also viewed these Economics questions

Question

Differentiate between a profit center and an investment center. LO1

Answered: 1 week ago

Question

1. Effort is important.

Answered: 1 week ago