Assuming that B0 = B0p + B0g = 0, combine the households and governments intertemporal budget constraint
Fantastic news! We've Found the answer you've been seeking!
Question:
Assuming that B0∗ = B0p + B0g = 0, combine the household’s and government’s intertemporal budget constraint to show that the aggregate resource constraint is independent of the specific choice of consumption taxes. That is, show that present discount value of the total demand for goods is equal to the present discounted value of the endowment. Using this insight, show graphically the following three economies and discuss the implications for utility.
(a) An economy in which τ1 =τ2 =0andG1 =G2 =0.
(b) An economy in which τ1 =τ2 >0andG1 =G2 =G>0.
(c) An economy in which τ1 >0andG1 =G2 =G>0
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date: