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1. Consider the case of a borrower within the life-cycle model of consumption and saving. Explain and illustrate how borrowing changes in response to a

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1. Consider the case of a borrower within the life-cycle model of consumption and saving. Explain and illustrate how borrowing changes in response to a proportional tax on interest under the following situations. a) Interest earnings are taxed, and interest payments are deductible (2.5marks) Interest earnings are taxed, and interest payments are non-deductible (2.5 marks) b)

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