Assuming that B0∗ = B0p + B0g = 0, combine the household’s and government’s intertemporal budget constraint to show that the aggregate resource constraint is independent of the specific choice of consumption taxes. That is, show that present discount value of the total demand for goods is equal to the present discounted value of the endowment. Using this insight, show graphically the following three economies and discuss the implications for utility.

(a) An economy in which τ1 =τ2 =0andG1 =G2 =0.
(b) An economy in which τ1 =τ2 >0andG1 =G2 =G>0.

(c) An economy in which τ1 >0andG1 =G2 =G>0

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Risk premium Eleanor Burns is attempting to find the nominal rate of interest for a security. She has gathered the following data: a. If the real rate of interest is currently 2%, find the risk-free rate of interest applicable to the security. b. Find the total risk premium attributable to the security's issuer and issue characteristics. c. Calculate the nominal rate of interest for the security. a. If the real rate of interest is currently 2%, the risk-free rate of interest applicable to the security is %. (Round to one decimal place.) b. The total risk premium attributable to the security's issuer and issue characteristics is%. (Round to one decimal place.) c. The nominal rate of interest for the security is %. (Round to one decimal place.) Enter your answer in each of the answer boxes. Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Characteristic Time to maturity Inflation expectation premium Risk premium for: Liquidity risk Default risk Maturity risk Other risk Print Done Security 12 years 7.0% 1.1% 1.8% 0.7% 1.3% G Risk premium Eleanor Burns is attempting to find the nominal rate of interest for a security. She has gathered the following data: a. If the real rate of interest is currently 2%, find the risk-free rate of interest applicable to the security. b. Find the total risk premium attributable to the security's issuer and issue characteristics. c. Calculate the nominal rate of interest for the security. a. If the real rate of interest is currently 2%, the risk-free rate of interest applicable to the security is %. (Round to one decimal place.) b. The total risk premium attributable to the security's issuer and issue characteristics is%. (Round to one decimal place.) c. The nominal rate of interest for the security is %. (Round to one decimal place.) Enter your answer in each of the answer boxes. Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Characteristic Time to maturity Inflation expectation premium Risk premium for: Liquidity risk Default risk Maturity risk Other risk Print Done Security 12 years 7.0% 1.1% 1.8% 0.7% 1.3% G

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o The aggregate resource restriction is unaffected by the particular choice of consumption taxes sup... View the full answer