1.Consider a two period model in which you work in the first period, and live off savings in the second period.Suppose that income is $200,000, the interest rate is 50% and the income tax rate is 30%.

a.Draw the budget line.

b.Draw the budget line if the tax rate falls to 10%.

c.Using indifference curve analysis, indicate the impact of the tax reduction on savings.

d. Draw the budget line if the tax rate falls to 50% and an unlimited RSP is introduced