Consider an economy of identical infinitely lived people. Suppose there is a tax cut in period 1
Question:
a. Write the government budget constraints for period 1 and for periods t>2.
b. Demonstrate that this tax cut and bond issue will not alter the wealth of an infinitely lived person.
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a In period 1 the government gives a tax cut of d goods per person This is financed by debt issue Th...View the full answer
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Related Book For 
Modeling Monetary Economies
ISBN: 978-1107145221
4th Edition
Authors: Bruce Champ, Scott Freeman, Joseph Haslag
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