Problem 4 Ricardian Equivalence Consider a two~period economy in which the representative consumer max imizes the utility function [27(00. c1) = maxln(co) + Iln(cl) co+s+b C1 \"yo\"To (1+?)3+(1+r5)b+y1T1 where .8 is the preference discount rate. To and 7'1 are lump~sum taxes. 3 is the bank saving and b is the gov debt. Assume N identical people in the economy. Suppose the present value of the government expenditure is G. (a) 1What should 7'}, equal to and why? (b) Derive the level of optimal consumption in the two periods. Derive the scal multiplier of the economy. (0) Use this model to explain the Ricardian equivalence. (d) Suppose the people have a borrowing constraint 8 2 0, can you show that whether Ricardian equivalence is still true or not. Please explain the intuition