1. 42 POINTS Consider the following one-period model. Assume that the consumption good is produced by a linear technology: Y = 2ND where Y is
1. 42 POINTS Consider the following one-period model. Assume that the consumption good is produced by a linear technology: Y = 2ND where Y is the output of the con- sumption good, 7. is the exogenous total factor productivity, ND is the labour hours. Government has to nance its expenditures, G, using a lump-sum tax, T, on the rep- resentative consumer. There is no other tax in the economy. The rm is owned by the representative consumer who is endowed with h. hours of time she can allocate between work, N S and leisure, 1. Preferences of the representative consumer are: U[c,l]=oelnc+(1ar)lnl (1] where (J
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