Review Questions

1.
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What is an investment? What is an investment in human capital?
2.
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Give some examples of human capital investments.
3.
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Why is it important to use the present value concept when examining human capital investments?
4.
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What is the predicted effect of an increase in interest rate on college attendance?
5.
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Explain why, if capital markets are perfect, high- and low-ability workers are predicted to have the same rate of return on their human capital investments. What happens if capital markets are imperfect?

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