Hi, Please answer as soon as possible.

1. Consider the model of consumption under uncertainty from the chapter 2 notes. Let the per period utility function be quadratic: u(c) = c - ;c. The household discounts the future at rate p. Future income, is uncertain, but evolves according to: y' = a+ Byte', where o, 3 > 0, and e is a random variable with mean zero. Assume that parameter values are such that the present value of the consumer's lifetime income is positive for all possible realizations of c'. The household has rational expectations. Suppose there is a lump sum tax that reduces the household's income in the first period (i.e. after-tax income in the first period equals y - t, where t is the tax). The government announces that there will be a tax cut in the second period. That is, future taxes will be only a fraction, call it x, of current taxes. That is: t' = r . t, where 0