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In this question, we investigate the effect of lumpsum tax and sales tax on houshold's consumption and saving decisions. Consider a two period model where
In this question, we investigate the effect of lumpsum tax and sales tax on houshold's consumption and saving decisions. Consider a two period model where the utility of a representative consumer is given by U(c1, c2) = log(c1) log(c2) (1) where c1 is consumption in period 1, c2 is consumption in period 2 and is discount factor
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