3 Constraints Consider the two periods model. Suppose now a household has to pay lump-sum tax to the government. Thus, this household's constraints are Yt = Ct + St + ItYtti + ( 1 + rt)St = Ct+1 + St+1 + It+1 Here, It represents the lump-sum tax this household pays to the government in period t and It+1 represents the lump-sum tax this household pays to the government in period t+1. 1. Explain why Sit1 = 0. 2. Given St+1 = 0. Derive the Life-time budget constraint for this household as Ct+1 Yt+1 - Ti+1 Ct + = Y - It + 1 + rt 1 +It