Suppose workers are able to supply labor to earn income Y in year 0, and cannot...

  

 

Transcribed Image Text:

Suppose workers are able to supply labor to earn income Y in year 0, and cannot earn any labor income in year 1. There are two ways to save; they can invest in low- income housing X or invest in some other financial asset S. The return on money invested in X is r', while the return on other assets is r. This worker must pay a comprehensive personal in income tax rate of T on all income. Assume now that r' = r. What is the worker's intertem- poral budget constraint? 5 points. Of the savings that consumers choose to do, which firm will receive more? Explain why. 5 points. Suppose workers are able to supply labor to earn income Y in year 0, and cannot earn any labor income in year 1. There are two ways to save; they can invest in low- income housing X or invest in some other financial asset S. The return on money invested in X is r', while the return on other assets is r. This worker must pay a comprehensive personal in income tax rate of T on all income. Assume now that r' = r. What is the worker's intertem- poral budget constraint? 5 points. Of the savings that consumers choose to do, which firm will receive more? Explain why. 5 points.

Answer rating: 100% (QA)

Year 0 income Y Year 1 no income Save low income housing ... View the full answer