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Consumers pay lump-sum taxes and consumption taxes. Denote the consumption tax rate in the current period by x and the consumption tax rate in the
Consumers pay lump-sum taxes and consumption taxes. Denote the consumption tax rate in the current period by x and the consumption tax rate in the future period by x'. As usual, y and y' denote the consumer's income in the current and future periods, respectively.
The total amount of taxes paid by the consumer in the current period is t + xc.
The total amount of taxes paid by the consumer in the future period is t' +x'c'.
a: You can take as given that the consumer's lifetime budget constraint is
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