# Question: In the endogenous growth model suppose that there are three

In the endogenous growth model, suppose that there are three possible uses of time. Let u denote the fraction of time spent working, s the fraction of time spent neither working nor accumulating human capital (call this unemployment), and 1 – u – s the fraction of time spent accumulating human capital. Assume that z = 1 and b = 4.2. Also assume that the economy begins period 1 with 100 units of human capital.

(a) Suppose that for periods 1, 2, 3, . . . , 10, u = .7 and s = 0.05. Calculate aggregate consumption, output, and the quantity of human capital in each of these periods.

(b) Suppose that, in period 11, u = 0.6 and s = 0.15. Then, in periods 12, 13, 14, . . . , u = 0.7 and s = 0.05. Calculate aggregate consumption, output, and the quantity of human capital in periods 11, 12, 13, . . . , 20.

(c) Suppose alternatively that in period 11, u = 0.6 and s = 0.05. Again, calculate aggregate consumption, output, and the quantity of human capital in periods 11, 12, 13, . . . , 20.

(d) Now suppose that in period 11, u = 0.6 and s = 0.10. Calculate aggregate consumption, output, and the quantity of human capital in periods 11, 12, 13, . . . , 20.

(e) What do you conclude from your results in parts (a)–(d)? Discuss.

(a) Suppose that for periods 1, 2, 3, . . . , 10, u = .7 and s = 0.05. Calculate aggregate consumption, output, and the quantity of human capital in each of these periods.

(b) Suppose that, in period 11, u = 0.6 and s = 0.15. Then, in periods 12, 13, 14, . . . , u = 0.7 and s = 0.05. Calculate aggregate consumption, output, and the quantity of human capital in periods 11, 12, 13, . . . , 20.

(c) Suppose alternatively that in period 11, u = 0.6 and s = 0.05. Again, calculate aggregate consumption, output, and the quantity of human capital in periods 11, 12, 13, . . . , 20.

(d) Now suppose that in period 11, u = 0.6 and s = 0.10. Calculate aggregate consumption, output, and the quantity of human capital in periods 11, 12, 13, . . . , 20.

(e) What do you conclude from your results in parts (a)–(d)? Discuss.

**View Solution:**## Answer to relevant Questions

Suppose that z, the marginal product of efficiency units of labor, increases in the endogenous growth model. What effects does this have on the rates of growth and the levels of human capital, consumption, and output? ...Suppose that the government introduces a tax on interest earnings. That is, borrowers face a real interest rate of r before and after the tax is introduced, but lenders receive an interest rate of (1 – x)r on their ...Suppose that a consumer has income y in the current period, income y' in the future period, and faces proportional taxes on consumption in the current and future periods. There are no lump-sum taxes. That is, if consumption ...Why is a good conductor of electricity also a good conductor of heat? Determine how the following affect the slope of the output supply curve, and explain your results:(a) The marginal product of labor decreases at a faster rate as the quantity of labor used in production increases.(b) The ...Post your question