Question
Assume an economy with 2000 consumers. Each consumer has income in the current period of 50 units and future income of 80 units and pays
Assume an economy with 2000 consumers. Each consumer has income in the current period of 50 units and future income of 80 units and pays a lump-sum tax of 10 in the current period and 20 in the future period. The market real interest is 9%. Of the 2000 consumers, 1200 consume 70 units in the future, while 800 consume 20 units in the future
a. Determine each consumer's current consumption and current saving. For the group of consumers that consume 70 units in the future, current consumption is ___ and current saving is ___?
b. Determine aggregate private saving, aggregate consumption in each period, government spending in the current and future periods, the current-period government deficit, and the quantity of debt issued by the government in the current period.
c. Suppose that current taxes increase to 15 units for each consumer. Repeat parts (a) and (b) and explain your results
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