macroeconomics assignment

Q.3
1.
The consumer’s wealth depends upon the government spending present value. If the interest rates are zero then changing the timing of the government spending wont impact the wealth of the consumer since the present value remains same.
However, due to the positive interest rates, which are prevalent, changing the timing of the spending will lead to higher wealth of the consumer due to lower current taxes.
2. Changing the timing of the government spending would lead to lower taxes in this period and hence, the Ns decreases due to lower outflow of taxes. However, due to this imbalance Nd will increase or rather remains same. Ys will decrease due to lower working hours and hence Yd will also decrease.
3. The real interest rates will decrease due to lower economic activity in the country and hence, the wages will also decrease.
4. Consumption in the country will decrease due to lower spending by the government will reduce the growth in the firm and the investment will also decrease due to slower growth expected.
Q.5
A. Consumer’s problem is to maximize the utility.
Utility function = 3l ^ 0.5 + C
Consumer’s budget constraint = w * ( 1-l ) + pi
Y =...