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(OLG with leisure.) Consider a version of the Diamond's model with leisure as an argument of the utility function. More specifically, assume utility of an agent born at t is y log Cit + (1 7) log lt + log C2,t+1, with > 0 and ye [0, 1], and lt denoting leisure. The young worker has an endow- ment one unit of time, so 1 lt denotes her labor supply. The production function is Cobb-Douglas. The government spends a certain amount of goods per period, which is funded with lump-sum taxes 7 levied on the young population. (a) Characterize the steady-state for a given fiscal policy. (b) What is the effect of a permanent rise in public spending on the capital/labor ratio? (OLG with leisure.) Consider a version of the Diamond's model with leisure as an argument of the utility function. More specifically, assume utility of an agent born at t is y log Cit + (1 7) log lt + log C2,t+1, with > 0 and ye [0, 1], and lt denoting leisure. The young worker has an endow- ment one unit of time, so 1 lt denotes her labor supply. The production function is Cobb-Douglas. The government spends a certain amount of goods per period, which is funded with lump-sum taxes 7 levied on the young population. (a) Characterize the steady-state for a given fiscal policy. (b) What is the effect of a permanent rise in public spending on the capital/labor ratio

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