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Consider a small open economy with a single household who receives utility from consumption of a final good in two periods. The household has h
Consider a small open economy with a single household who receives utility from consumption of a final good in two periods. The household has h = 100 units of time which it devotes fully to working because it does not value leisure. Household preferences are given by U(C1,C2) = C1^0.5 + 2C2^0.5 .Labour is the only input in production and the final good is produced with the following technologies in each period: Y1 = 6N1 Y2 = 12N2, where Nt is labour input in period t. The initial government spending pattern is given by G1 = 10 and G2 = 30. The government is imposing a lump-sum tax equal to Tt on the household in period t. The government is considering borrow as much as possible in period 2. The household and government can borrow and lend from each other and from the rest of the world at a fixed gross real interest rate equal to R = 1.20. What's the variable of T1, T2, C1, C2, S1^p, S1^G, TB1, and utility
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