Question: Suppose that the optimal consumption for a consumer in the current period is C1=70,000. Starting from this, suppose that the government makes a transfer T=20,000

Suppose that the optimal consumption for a consumer in the current period is C1=70,000. Starting from this, suppose that the government makes a transfer T=20,000 to the consumer (lump-sum tax cut). The government funds the transfer by borrowing. If Ricardian equivalence applies, what would happen to the optimal values of current consumption C1, private saving Sp, and future consumption C2 chosen by the consumer?

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