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Consider the model presented in Module 12. In an overlapping generations model economy with two-period-lived people the capital is paying a rate of return x.
Consider the model presented in Module 12. In an overlapping generations model economy with two-period-lived people the capital is paying a rate of return x. Assume there is no fiat money. Consider a tax cut of 100 goods per young person in period t financed by an equal increase in government debt. In the next period (t+1), the debt will be paid off by a tax on the next young generation. Analyze the effects of this policy on a young person's wealth, saving, consumption and capital investment.
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