Consider a two period economy without investment but with variable hours of work No. In this economy, the aggregate (inverse) labour supply function is mg 2 2 + 0.3Nn + 0.200 and the aggregate consumption function is cw) : 0.5m on) + 24/(1 + r) Aggregate output is produced according to K] = Zan]. It follows that rms are willing to hire any amount of labor at wage mg 2 Zn. The government spends Go 2 100 in period U which is entirely nanced by lump sum taxes To. Assume that labour productivity so is equal to 15. (a) Suppose that 00 = 50. Draw the inverse labor demand curve (i.e. am against No). Would consumers accept to work if 'in = 10 'E' (b) Find the equilibrium value of N0 and the equilibrium wage 1110, given CO. (e) Suppose that N0 = 10. Find the equilibrium interest rate 'r and aggregate consump- tion in this case. Illustrate with a graph. (d) What do you conclude from (a), (b), (c)? Explain. Suppose that government spending increases by 17.5 (c) What happens to consumption and to aggregate demand if 'r and ND stay the same (i.e. 7' = 0.2 and N0 = 10]? Explain why Nu will also change. (f) Verify that NO will increase by 1 if 7' remains constant. Explain why 1? cannot remain at 0.2. Will 1" increase or decrease? How will Co and N0 be affected by this change? (g) Illustrate with a graph of the Goods market and a graph of the labor market what happens after G0 increases (from one equilibrium to the other): first, when 1' remains constant, and then, when T changes