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Assume that the consumption function is given by C=200+ 0.7(Y-7), the tax function is given by T = 100+ t1Y, and Y = 50K0.5L0.5,

 

Assume that the consumption function is given by C=200+ 0.7(Y-7), the tax function is given by T = 100+ t1Y, and Y = 50K0.5L0.5, where K = 144. (1) If t = 10%, and L increases from 100 to 196, what is the effect on consumption level? (2) If L = 100, and ti increases from 10% to 11%, what is the effect on consumption level?

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