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Please help me with below question. Assume that output (Y) in the economy is given by a Cobb-Douglas production mction, Y = zKN 1' where
Please help me with below question.
Assume that output (Y) in the economy is given by a Cobb-Douglas production mction, Y = zK\"N 1'\" where 2 represents total factor productivity, K is the xed capital stock, and N is labor. Utility is given by U =ln(C) + blnl,b > 0 where C is consumption, and 1 denotes leisure. Government collects taxes by taxing the rm's revenue at a at rate oft. (After-tax revenue for the rm is (1 t) Y). The government uses the tax to md its expenditure G = tY, and consumers do not value G. Assume that initially G = W = GI a) Household Problem: Write the equation for the household budget constraint as a function of leisure. Assuming that the household takes the wage (W1) and prots (7:1) as given, draw a graph of the household's optimization problem, with c on vertical axis and l on horizontal, denoting optimal values of consumption and leisure with subscript 1 ( 1 ). Label everything, including intercepts. What is the slope of the budget constraint? (15 points)Step by Step Solution
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