Kent State University Intermediate Macroeconomics Written Problem Set 1 Due at 1158PM in Blackboard on the Date Indicated in the Syllabus There are 100 points and two page: for this assignment Show your work for full credit! For the following problems, consider an economy made up of a representative household, a government that spends and finances it by collecting lump sum times There is no trade nor investment in this economy, The price of consumption is equal to one (p=1)t Suppose the representative household in the economy has the following utility function and MRS: u(C,L) = 41n((:) +l3ln(L) which implies that the MRS he = 13C/4L where C is consumption and L is leisure hours of the 800 hours available Firms have the following technology where Y is the economy's goods and services with 900 units of physical capital (K) and N being labor used with the capital share of income and Total Factor Productivity given as (a = '33; z = 9.6): Y=zK"N\""') which implies that MPN = (l-u)zK\"N\"\"'. Solving the Competitive Equilibrium Solve for the following unknown variables using the information from the first page but with no government spending. What is the optimal level of consumption (6')? What is the optimal level of output (y')? What is the optimal level of leisure (1\")? What is the wage (w')? What is the optimal level of prot (n')? Optimal Choices in Equilibrium with Government Spending Suppose the government purchases 100 units of the economy's goods and services which would cause prot to he 825.1549 and wages to be 11,8460. How much labor would the consumer provide in this scenario? Assume that the economy is in equilibrium throughout this question. How much would the consumer choose to consume in this scenario? What would GDP for the country be in this scenario? Now suppose the government increases spending to 200 causing prot to be 843.7881 and wages to be 11.7165. How much labor would be provided in this scenario? How much would the consumer choose to consume in this scenario? What would be the new level of GDP for the country be in this scenario? What does this problem demonstrate regarding an increase in government spending? Page I of l