3) Within the context of Intertemporal optimization, where a person's lifetime budget constraint is given by:

Discuss the implication of the government deciding to decrease current taxes (T1) by $1000, without a corresponding cut in government spending so they must raise future taxes (T2) to keep the present value of taxes ( + 2/1+) constant

Explain what effect this sort of policy will have the effect on consumption and savings and why.