Question 2 The equation below is the optimisation problem for an infinite horizon model. Note that ne is 'hours worked', and not leisure and 1 is a parameter determining the elasticity of labour supply. L = 'In in (cz - .) 34. [Piana +P/(1 )kt - Pake+1 - Pa] t=0 0 (1) Derive the FOCs force, ne, and ke+1. (2) Derive the optimal choice between consumption and hours worked. (3) What happens to the labour supply when there there is an increase in consumption (assume that the wage stays constant). Question 2 The equation below is the optimisation problem for an infinite horizon model. Note that ne is 'hours worked', and not leisure and 1 is a parameter determining the elasticity of labour supply. L = 'In in (cz - .) 34. [Piana +P/(1 )kt - Pake+1 - Pa] t=0 0 (1) Derive the FOCs force, ne, and ke+1. (2) Derive the optimal choice between consumption and hours worked. (3) What happens to the labour supply when there there is an increase in consumption (assume that the wage stays constant)