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Consider the static model of the household discussed in Lecture 3. Suppose that instead of being subject to a lump-sum tax, the consumer faces a

Consider the static model of the household discussed in Lecture 3. Suppose that instead of being subject to a lump-sum tax, the consumer faces a labour income tax and a consumption tax . For simplicity, we normalize h (total time available) as 1 and there is no dividend income

If the household choose C* and *, how much tax revenue does the government collect? (5 marks)

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