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Consider the two-period model. Consumer's have preferences over current and future consumption (c and c'). Households receive income in the first and second period, (y,
Consider the two-period model. Consumer's have preferences over current and future consumption (c and c'). Households receive income in the first and second period, (y, y'). There is a lump-sum tax in each period t and t'. Households can save, s, for the second period and receive interest rate r. Derive the period budget constraints and use it to find the present value budget constraint (PVBC). Use the PVBC to find total household wealth. Let r=0, y=3, y'=3, t=2, and t'=0.5. What is the value of household wealth
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