2.This question examines government spending nanced bylump-sum taxes.There is a single representative household which hash= 10 units of time which it can divide betweenworking and leisure. The household's preferences over consumption of the nal good, leisure, and gov-ernment spending are given by the following utility function:U(C;`) +V(G) = 3 ln(4 +C) + 2 ln(1 +`) +G0:2;whereis a constant to be speci ed below.Production of the nal good uses labour only with technologyY=zND;wherezuctuates randomly between a relatively low level ofzL= 15 and a relatively high level ofzH= 20.The government nances government spending by lump-sum taxes equal toG=Timposed on thehousehold. In periods in which productivity is high, the government does not spend or tax;G=T= 0.But in periods when productivity is low, the governmentmayspend and tax at whatever level it takes tokeep output at the same level as it is when productivity is high. That is, the government uses governmentspending and taxation to eliminate uctuations in output.

(2.A.) (20 points)Complete Table 2.Table 2:

(2.A.) (20 points) Complete Table 2. Table 2: Lump-Sum Taxation 2 = 20 z = 15 2 = 15 2 = 15 G =0 G =0 G>0 G> 1 = 0.50 * = 0.50 1 = 0.50 1 = 2.00 Row Variable Column 1 Column 2 Column 3 Column 4 1 T* 0.00 2 N* 6.52 3 Y* 130.40 4 C* 130.40 CT U(C*, (* ) 17.70 U(C*, (*) + AV(G) 17.70