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consumer's utility function is logarithmic, u(ct) = ln(ct), government imposes taxes in both periods to see how this affects consumption decisions.In particular, suppose that the
consumer's utility function is logarithmic, u(ct) = ln(ct), government imposes taxes in both periods to see how this affects consumption decisions.In particular, suppose that the consumer solves the following maximization problem: subject to max ln(c1)+ln(c2) c1 ,c2 c1+ c2 =y1+ y2 1+r 1+r Set up the Lagrangian and take FOCs to find the Euler equation. In particular, suppose that the consumer has a logarithmic utility function and a lifetime budget constraint where the government taxes a lump-sum tax t1 in the current period and t2 in the second period. Find the optimal consumption in the first and the second periods and compare it with your answer above. Are the consumption levels different in both periods
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