Hi, can someone please help me with this Macroeconomics question? Thank you!
Nomy: Consider a static, one-per Static One Period Model of the Eco iod model of the economy. The...
1. (45 points) Consider the closed-economy one-period macroeconomic model developed in class. The consumer is endowed with h units of time, and chooses consumption C and leisure ` to maximize U = log(C) + θlog(`), subject to the budget constraint C = wNs + π. Production is described by Y = zNd . Government spending G is financed with a proportional revenue tax (tax rate τ ) on the firm. (a) (10) Find the firm’s optimal demand for labor Nd...
1. CRRA Utility Function: Constant relative risk aversion, or CRRA, utility function has been extensively used in macroeconomic analysis to represent consumer behavior. It takes the following general form u(x)- where σ is known as the curvature parameter. For the remainder of this question assume that σ>0. Assume that a representative household in a one-period model has the following preferences over consumption and leisure where l is leisure. The budget constraint is (in nominal terms) Pc nominal wage and n...
4. A recurring idea in Congress is to move the United States further away from a system of income taxes and towards a system of consumption taxes. A nationwide consumption tax would essentially be a national sales tax, a system that many Western European countries have. It is often referred to as a value-added tax or a VAT Negative consumption is ruled out because it makes no 'economic sense. Zero consumption would be subop timal behavior with either of these...
2. (20 POINTS) Consider an economy with one representative consumer and one representative firm. There is no government (no taxes). The consumer's utility function is U = log(C) - N where cis consumption and N$ is labor supply. The consumer's budget constraint is c = WNS + it in real terms. The representative firm has a standard Cobb-Douglas production function F(z,K,N) = zkN1-4. Suppose z=1 and K=1 so that the production function is simplified to F(N) = N1-4. Set up...
Consider the following information about the model economy U(c,l) = log(c) + log(l) Ns=1-l F(K, N)=2K0.5N0.5 N=labor l=leisure K=capital 1. Suppose further that there are no taxes. What is the optimality condition between the choices of consumption and labor supply? 2. what is the marginal product of labor? 3. what is the optimality condition for the firm? 4. what is the labor demand function for the firm? 5. what is the supply of consumption good in terms of the wage...
16.8 Business Application: Valuing Land in Equilibrium Suppose we consider a Robinson Crusoe economy with one worker who has preferences over leisure and consumption and one firm that uses a constant returns to scale production process with inputs land and labor A. Suppose that the worker owns the fixed supply of land that is available for production. Throughout the problem, normalize the price of output to 1 Explain why we can normalize one of the three prices in this economy...
Consider a Diamond model, where we set the productivity factor At to unity (1) in all periods. The working population. Lt, grows at rate n, i.e., Lt+1-(1 + n) Lt. Lower-case letters denote per-worker terms, e.g earned (from labor) in the first period of life (wi) is spent on saving (St) and first-period consumption (C1t). The first-period budget constraint can thus be written Ki/Lt. Agents live for two perioo In retirement, the same agent consumes C2t+1, consisting of savings from...
Problem 1 Consider the following two-period utility maximization problem. This utility function belongs to the CRRA (Constant Relative Risk Aversion) class of functions which can be thought of as generalized logarithmic functions. An agent lives for two periods and in both receives some positive income. subject to +6+1 4+1 = 3+1 + (1 + r) ar+1 where a > 0,13 € (0, 1) and r>-1. (a) Rewrite the budget constraints into a single lifetime budget constraint and set up the...