Assume a two period Ramsey economy with consumers and producers. Utility function and production function are: 16 16 (:1 1 1 (:2 1 + U(CI:CZ)= 10 1+p 10 and Y = AKQL1_\" Assume ,0 > 0. Also assume that the interest rate is r. Denote by R16 the rate of remuneration of capital and w the wage(i.e. the rate of remuneration of labor). Assume that the government levies the following taxes: Tm on wages, Ta on assets (savings), 'TC on consumption, and 'Tf on rm prots. There is no inheritance. All taxes are proportional. 1. [10 points] Which of these taxes are now part of the Euler Equation? Derive the new Euler Equation. 2. [5 points] Analyze this statement: the taxes which are not part of the Euler Equation do not distort anything in the economy. 3. [5 points] Suppose you are asked by a policy maker about increasing taxes. Which out of n, Tm Tc and/or Tf would you recommend that they increase? Why? (Hint: there is no \"righ \" answer you will be judged on the argument you make.)