Question: MACRO ECON - PLEASE OUTLINE CORRECT ANSWER PLEASE AND THANKS Consider the following one-period model. Consumer Utility function over consumption (C) and leisure (L) U(C,L)

MACRO ECON - PLEASE OUTLINE CORRECT ANSWER PLEASE AND THANKS

Consider the following one-period model. Consumer Utility function over consumption (C) and leisure (L) U(C,L) = C21 2 Total hours: H = 40 Labour hours: N" = H - L Non-labour income: TT Lump-sum tax: T Hourly wage: w Firm Production function: Y = ZF(N) = zN Total factor productivity: z = 2 Government Government spending (exogenous): G = 20 Suppose that the total factor productivity, z, increases to 5. What is the substitution effect of this wage change on labour supply(N)? O A. +5.51 O B. +8.51 O C. -5.51 O D. -8.51 O E. None of the above

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