1.Detroit is mired in recession.The Republican mayor wants to do something to help pull the city up by its bootstraps.He believes wholeheartedly in the merits of low taxes and personal empowerment.But realizing major cuts in government expenditures might harm the local economy (and his reelection prospects), he decided to cut taxes and leave government expenditures unchanged.To make up for the resulting deficit he is going to borrow.Please analyze the effect of the mayor's tax cutting proposal on Detroit residents' budget constraints.To set this up, assume that prior to the mayor's proposal a typical individual budget constraint over the current and next period are: (10)

C₁= M - S - T

C₂= M +S(1+i) - T