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2-priod model. household utility:

2-priod model. household utility: U(C1,C2)=ln C1 + ln C2
C1+S1=Y1 period1
C2 = Y2+(1+i1)S1-T2 period2
T2=Ts(1+i1)S1

Derive the optimal comsumption ratio C2/C1 showing how it depends on the tax rate on savings. Nmaely what happens wht Ts increases.

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2-priod model. household utility: U(C1,C2)=ln C1 +β ln C2
C1+S1=Y1 period1
C2 = Y2+(1+i1)S1-T2 period2
T2=Ts(1+i1)S1
Derive the optimal comsumption ratio C2/C1 showing how it depends on the tax...

Sign up to view the full answer

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