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5. Suppose that the government enacts a new tax scheme whereby it col- lects $60 each period from young people and $40 each period from
5. Suppose that the government enacts a new tax scheme whereby it col- lects $60 each period from young people and $40 each period from old people. Also, suppose that the interest rate per period, r,is expected to remain at 200 percent for the foreseeable future. (a) What is the generational account of the old immediately after the tax scheme is implemented? (b) What is the generational account of the young immediately after the tax scheme is implemented? (c) Suppose instead that the government collects $100 each period in total, but makes the young pay only $30 each period. What is the generational account of the old immediately after the change? the generational account of the young? Compare your answers to those above
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