Question

Consider the following effects of an increase in taxes for a consumer.
(a) The consumer’s taxes increase by ∆t in the current period. How does this affect current consumption, future consumption, and current saving?
(b) The consumer’s taxes increase permanently, increasing by ∆t in the current and future periods. Using a diagram, determine how this affects current consumption, future consumption, and current saving. Explain the differences between your results here and in part (a).



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  • CreatedDecember 05, 2014
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