Question

In a Human Capital Solow Model. What happens to total capital stock (human and physical) per work, output per worker, output, and consumption per worker over time when:

A) G spending on military ↑
B) G spending on education, infrastructure, healthcare ↑
C) T ↑
D) Foreign Direct Investment (trade) allows domestic investment (I) to ↑

Answer 1

A)If the government increases the spending on military in the human capital Solow model the capital stock per work,the output per worker,consumption per worker will remain unchanged as the increase in government spending on military does not have much effect on the output and consumption of worker.B)When the government spending on education,infrastructure and health increases in the human capital stock model,it will increase the total capital stock per work,output per worker increases ,output and the consumption per worker will increase due to the advancements in the education,infrastructure and health due to increased government spending. C)when the taxes increases it implies that the government spending has decreased hence the total capital stock per work decreases,output per worker decreases,output and consumption per worker also increases as the tax increases the income of the workers will decrease and hence the consumption will decrease. D)When foreign direct investment allows the domestic investment to increase it will increase the total capital stock per work,output per worker,output and consumption per worker will also increases.