25.Consider a one-period closed economy model with government. The aggre-gate production is given byY = 2Nwhere N represents the employment and z is the total factor productivity.The consumer's preferences are given byU (C, 1) = ln (C) + In (1)subject to the following budget constraintC=w(h-1) +- Twhere denotes profits. The consumer has h units of time to split between laboursupply and leisure. The government spending is denoted by G and lump-sum taxesare denoted by T. The government's budget constraint is G = T.(g) Derive the equilibrium solution for output, Y*, and consumption, C*, in terms ofz, h and G.(h) Suppose that z = 4, h = 24, G = 5. Compute the equilibrium values of N*, w*, Y*, C*, T*.(Hint: You can use the Excel file used in class to verify your answers.)(i) If you use the social planner's problem, would you obtain the same solution?Briefly explain.

The social planner is a kind of benevolent dictator. His aim is that the consumers should receive…

(g) Derive the equilibrium solution for output, Y*, and consumption, C", in terms of z, h and G. (h) Suppose that z = 4, h = 24, G = 5. Compute the equilibrium values of N*, w*, Y*, C*, T*. (Hint: You can use the Excel file used in class to verify your answers.) (i) If you use the social planner's problem, would you obtain the same solution? Briefly explain.

(g) Derive the equilibrium solution for output, Y, and consumption, C", in terms of z, h and G. (h) Suppose that z = 4, h = 24, G = 5. Compute the equilibrium values of N, w, Y, C, T. (Hint: You can use the Excel file used in class to verify your answers.) (i) If you use the social planner's problem, would you obtain the same solution? Briefly explain.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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