Suppose the government debt of 100 goods in period financed not the tax cut of Example 17.1 but a government capital project that will pay off 100 r^g goods in the following period (t + 1). At that time, the government retires the debt. Assume that the returns from the capital project are used to reduce the taxes of the old in period t +1.
a. How large must r^g be so that the next generation need not pay extra taxes to retire the debt?
b. What will the effect of the debt-financed capital project be on the consumption, saving and privately owned capital of the people born in period t if r^g = r?
c. What will the effect of the debt-financed capital project be on the consumption, saving and privately owned capital of the people born in period t if  r^{g >} r?