Please help with the following practice problem. No grade associated. I do not really understand how to answer the question, so please use detailed explanations to help me understand.

Suppose that Lilistan has two types of citizens: low-income citizens (income = $20,000) and high-income citizens (income = $80,000). Interest income is taxed, and each type of citizen saves 10% of his or her income for retirement. The government is proposing to allow citizens to put money into an IRA, where the contributions would be tax deductible and interest would accumulate tax-ee. Withdrawals would be taxed as income. The government wants to set a $5,000 annual limit on the accounts. Discuss the effect of this policy on the saving choices of both the low-income and high-income citizens in terms of both income and substitution effects as well as the overall effect