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  3. 4 country a is located on a small island that...

Question: 4 country a is located on a small island that...

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4. Country A is located on a small island that is isolated from the outside workd. The country has one representative consumer, whose preference is represented by There is one representative firm in the econony which is owned by the consumer, it produces one type of good that can be used for consumption or government expenditure using capital and labour as inputs. The firm ows the capital it-and its production technology represented by where: is the total factor productivity, and a is the capital shase of income. The firm pays all of its prolfit back to consumer as dividend. The government of country A spend a pre-determined G amount of goods to provide publie services, and it taxes consumer throagh a lump-sum tax t to finance the expenditure the governments badget is balanoed G-t Now, suppone that the finm cannot change its capital stock, or improve its production tech nology in the short period, such that and K are given (a) When escibing this economy as an macroecosomic model, what is the set of exogenous variables? What is the set of endogenous variables that can be determined given the set of exogenous variables using the conoept of Competitive Equilabrinum? conditions have to be satisfied, who solves what problem and etc Which four of these endogenous variables are essentials, such that once you kno these (b) Define the competitive equilibeium for this econony, be specifie about what it is, what (c) List the set of equations that wil be used to determine all of the endogenous variables. four, all other endogenous variables can be obtained easily? (d) Write down the four equations that can be ssed to solve for these Sor essential enxloge nous variables, and describe where do they come from. Describe in details the steps of (e) Setup the Social planners problem for this ecomoy. What is the marginal condition i the firm had more capital, such how would you solve for the competitive equilibriam (without actually solving for it ). that pins down the planners choices (f) Now, describe what would happen to e, an that K>Kol
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