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Unformatted text preview: consumer has no assets. The interest rate is zero. The consumer desires perfectly smooth consumption over his lifetime. (a) What are the consumptions in each period? What is the desired saving? (b) Now suppose there is a temporary increase in government spending by $100, and all the current and future tax will be imposed on this consumer. If the tax is to be financed by current tax, what will happen to his current and future consumption, as well as the desired national savings? (c) Continue from part (b). Now suppose the increase in government spending is going to be financed by future tax, what will happen to his current and future consumption, as well as the desired national savings?...
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This note was uploaded on 10/12/2009 for the course ECON 291 taught by Professor J liu during the Spring '07 term at Simon Fraser.
- Spring '07
- J Liu