Question
Assume an economy (with two periods but no real investment) with 1000 consumers. Each consumer has income y = 150 in the current period and
Assume an economy (with two periods but no real investment) with 1000 consumers. Each consumer has income y = 150 in the current period and y' = 180 in the future period. The lump-sum taxes paid by each consumer are t = 30 in the current period and t' = 40 in the future period. The market real interest rate is 7% (i.e. r = 0:07). Of the 1000 consumers, 500 consume 200 units (per person) in the future, while 500 consume 80 units (per person) in the future. Determine aggregate private saving and the aggregate consumption in EACH period (the numbers). You should use the consumer's lifetime budget constraint to figure out the savings.
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