5. If the government taxes future wages at a proportional rate [I

5. If the government taxes future wages at a proportional rate 0 < T' < 1 then the opti- mization condition between consumption and lelsure in the future period is, (a) M RISE'" u," T'. (b) MRSev (c) MRSeU = (d) MRS 6. Suppose that initially borrowers and lenders face the same interest rate r. The govern- mcnt then imposes taxes on borrowing and lending such that thc borrowing ratc becomes -F a) and thc lending ratc becomes r(l T) whcrc o > O and 0 < T < 1. Thcn a borrower, (a) will reduce both current and future consumption. (b) will reduce current consumption but may increase future consumption. (c) will reduce future consumption but may increase current consumption. (d) may increase both current and futurc consumption. 7. Suppose that a consumer faces a borrowing limit a; on the amount they can borrow, and that this limit is high enough so that it is not binding. If the borrowing limit a: is reduced sufficiently that it becomes binding then the borrowing consumer: (a) has to reduce current consumption and increase future consumption, but, this makes them better off. (b) has to reduce current consumption and increase future consumption, and this makes them worse off. (c) has to reduce current consumption and future consumption, and this makes them worse off. (d) has to reduce current consumption and increase future consumption, but this leaves them indifferent.