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In: Economics

In the​ one-period model, education can be represented as time spent by the representative consumer that...

In the​ one-period model, education can be represented as time spent by the representative consumer that is neither leisure nor time applied to producing output. What the economy gains in the future is that the representative consumer then has more time​ available, as measured in terms of effective units of labour time​ (adjusted for skill​ level, or what economists call human​ capital). That​ is, the aggregate production function can be seen as Y=zF(K, eN)​, where e is the quantity of human capital per​ worker, and education in the present increases e in the future.

Using the​ one-period model, what effects does additional education have in the present on​ consumption, leisure,​ employment, aggregate​ output, and the real​ wage?

consumption _________ (may increase, decrease, or not change, or must decrease, or must not change, or must increase)

Leisure _______ (may increase, decrease, or not change, or must decrease, or must not change, or must increase) and  the magnitude of the change in leisure _________ (must be equal to, must be less than, must be greater than, or must be greater than, less than, or equal to) the amount of additional time devoted to education. Employment​ (measured as hours​ worked) ________ (may increase, decrease, or not change, or must decrease, or must not change, or must increase) aggregate output _________(may increase, decrease, or not change, or must decrease, or must not change, or must increase) the real wage ________ (may increase, decrease, or not change, or must decrease, or must not change, or must increase)

Solutions

Expert Solution

Since the person is taking additional education, this implies the person has to spend money on education, Therfore he/she

a) decrease consumption

b) decrease leisure becuase he has to put extra efforts and time in completing that education

c) magnitude of change in leisure must be greater than the amount of additional time devoted to education.

d) employment may incresase because people are interested in taking additional education.

e) output must not change because the person is taking additonal education and not contributing towards output.

d) real wage may not change due to additional education in the present.

Rahul Sunny answered 2 years ago
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