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Consider a two period consumption decision model. (Intertemporal Choice Model): Suppose that under the current tax system, interest income is subject to a proportional tax
Consider a two period consumption decision model. (Intertemporal Choice Model): Suppose that under the current tax system, interest income is subject to a proportional tax at 20%, and interest payments by borrowers are deductible. Interest rate is 5%. Draw an individual's before-tax budget line and after-tax budget line on a diagram, indicating their slopes. (Calculate the value of the slope.)
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