Should you stay in school beyond the current semester? Describe how you might use the neoclassical theory of investment to help you decide
What will be an ideal response?
Additional schooling makes sense, if the expected marginal benefit is at least as large as the user cost. If I am close to graduation, and "diploma capital" contributes much to my expected income and/or valued competencies, the additional investment may be warranted. Even if graduation is a distant (or irrelevant) goal, the human capital I've acquired this semester might enhance the expected benefit of further schooling. I know the explicit and implicit costs of an additional semester, but will the knowledge I might acquire increase in value over time, or depreciate?
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Suppose the current real interest rate is 4 percent and the equilibrium real interest rate is 3 percent. Then
A) prices rise and inflation occurs. B) there is a surplus of loanable funds. C) there is a shortage of loanable funds. D) there is neither a shortage nor surplus of loanable funds.
If the real marginal tax rate increases in the market clearing model then:
a. the supply of labor decreases. b. real output, Y, rises. c. the demand for capital increases. d. all of the above.