2. Write down Crusoe's maximization problem where he takes government spending as given. 3. Derive the rst order conditions. 4. Explain what the gross growth rate of consumption (05:1) depend on. 5. Solve for the steady state of this economy where kt\" = is; = k and gt+1 = gt 2 9. Show the function of steady state consumption, 0, as a function of g and other model parameters. What value of 9 would maximize the steady state consumption? Now Assume that the government nances the spending by proportional taxes on output such that gt 2 Tyt. 6. Do the questions 2-4 again. Explain in particular how the growth rate of consumption depends on 1'. Explain why and describe the difference from the lump-sum case. 7. Do question 5 again. What value of '7' would maximize the steady state consumption? Explain. 8. How does public spending as a share of output relate to consumption growth in the data? Obtain data from FRED and create a scatter plot. Comment in light of the theoretical exercises above