2. Consider a consumer whose utility is a function of her consumption in two periods, period 1 (the present) and period 2 (the future): U : 1.75C225 with her marginal rate of substitution, indicating the amount of C2 required to compensate her for the loss of a unit of C1, given by 3C2/C1. Her (pre-tax) income in the present is 110 and her (pre- tax) income in the future is 120. The market interest rate is 10%. a. Suppose the government has a defense budget that must be financed by taxes. In particular, this consumer pays taxes equal to 10 in both period 1 and period 2. Calculate her consumption in both periods and the amount that she borrows or lends in the present. [Hint Review pages 77-79 of the main lecture notes and page 1 of the extra lecture note on \"Summary of decisions involving time\". Calculate the consumer's post-tax income in both periods. For these levels of income, use the tangency condition and the budget line equation to find the consumer's optimal consumption in both periods and the amount that she borrows or lends in the present] b. Now suppose that the government continues its defense spending, but reduces taxes in the present, financing part of its current defense budget by borrowing. Any amount that the government borrows in the present plus interest must be paid back in the future out of taxes that are collected at that time. For our consumer, who does not lend anything to the government, taxes are reduced to O in the present, but she knows that her taxes in the future