Consider an economy in which one unit of labour yields one unit of output. Paul, the representative consumer, has one unit of time at his disposal. Paul values consumption and leisure; His preferences are such that, at the margin, Paul is ready to give up C/l units of the consumption good for an extra unit of leisure (ie. MRS= C/l). The goal of the government is to set spending so that they represent 40% of national income (G=0.4Y). Government spending is financed with a lumpsum tax. Profit maximization implies that w = 1 and that = 0 regardless of the value taken by N. The firm produce according to the following production function Y=wNd

Find the maximum consumption level which can be achieved in this economy given any amount of leisure and any given value of G.