Let the production by the representative firm be represented by the production function Y = ZN d Where Y is the aggregate output, z is the total factor productivity or level of technology parameter, and Nd is the labor input. The firm hires labor units at the market determined wage rate, w up to the point of profit maximization. Labor is the only input used in the production process hence z represents labor productivity. There is a representative consumer who wishes to maximize utility represented by utility function U(c.1) where c is consumption, 1 is leisure. The consumer has h amount of maximum hours during the day. Suppose the utility function of the consumer is as follows: U(c. ) = c 2/3 & 1/3 Suppose that there is a government which collects taxes on consumption expenditures of the consumer, such as a value added tax on consumption, at rate 0