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9. Assume the government introduces a tax on interest paid to savers. Illustrate the impact of the tax on a saver using the two-period model
9. Assume the government introduces a tax on interest paid to savers. Illustrate the impact of the tax on a saver using the two-period model of rational consumer choice. Carefully explain any assumptions you have made in your analysis. Assume the government now introduces a personal savings allowance so that the saver can earn up to this allowance tax-free. Interest earned above the level of the allowance is fully taxed. Analyse the impact of this policy on a saver
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