Question

Suppose that the government makes a one-time investment in new public school buildings, which results in a one-time reduction in current consumption. The new public school buildings increase the efficiency with which human capital is accumulated. Use the endogenous growth model we discussed in class to determine the effects of this change on the paths of aggregate consumption over time. Explain the trade off between current consumption and future consumption.

Answer 1

as per endogenous development speculations venture on human resources or capital has expanding re-visitations or increase return of scale over the long haul or terms. so for this situation the administration makes a one-time interest in new government funded school structures, which brings about a one-time decrease in utilization yet The new state funded school structures increment the effectiveness with which human resources is collected. so the expanded effectiveness of human resources will help in more prominent creation eficiency and the yield.

In other words ,The government has decreased the utilization in the market to build the interest in the government funded school, this will diminish the total utilization in the market in the short run, yet the total demand curve will move to the right the grounds that the administration use is essential for the total interest. Over the long run, the profitability of the human capital will increment and move the total supply curve and since quite a while ago run total flexibly curve to one side. This will diminish the cost in the market and increment the likely GDP, generally speaking expanding the utilization and yield in the economy. This venture was a smart thought at long last.