According to Feldstein [2008b], “only about 10% to 20%” of a one-time tax rebate provided to taxpayers in 2008 was spent immediately.

Using the life-cycle model of Figure 18.7, explain why this result could have been predicted. (Hint: Think about how a one-time rebate affects the endowment point and budget constraint in Figure 18.7. Contrast this to how a permanent rebate affects the endowment point and budget constraint.)