In the one-period model, education can be represented as time spent by the representative consumer that is neither leisure time nor time applied to producing output. What the economy gains in the future is that the representative con-sumer then has more time available, as measured in terms of effective units of labor time (adjusted for skill level, or what economists call human capital). (a) Using the one-period model, show what effects additional education has in the present on consumption, leisure, employment, aggregate output, and the real wage.
(b) Similarly, show the effects the additional education that people acquire today will have in the future on consumption, leisure, employment, aggregate output, and the real wage.
(c) What does your analysis in parts (a) and (b) have to say about the trade-offs society makes between the present and the future in investing in education?