Assume a consumer has current-period income y = 100, future-period income y' = 50, current and future taxes t = 10 and t' = 2, respectfully, and faces a market real interest rate of r = 0.1, or 10 percent per period. The consumer would like to consume and equal amounts in both periods, that is, he/she would like to set c = c'.

a. What is the value of lifetime wealth, which is the present value of lifetime disposable income, of this consumer?

b. What is the future value of his/her lifetime wealth? Round off this value to the nearest integer.

c. What is the equation for this consumer's lifetime budget constraint?

d. Calculate his/her optimal current-period and future period consumption and optimal savings. Round off this value to the nearest integer.

e. The government decides to reduce current period taxes by 10 so that t = 0, but increases taxes by 11 in the future period so that t' = 13. Calculate this consumer's optimal current-period and future-period consumption and optimal savings after the change in current-period and future-period taxes.