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Question 2 Consider a representative household that lives for 2 periods (t and t+1) with a lifetime utility function: U = u(C't) + u(Ct+1) (1)

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Question 2 Consider a representative household that lives for 2 periods (t and t+1) with a lifetime utility function: U = u(C't) + u(Ct+1) (1) where the discount factor is )3. The household earns income (Y; and VH1) in period t and t + 1. The household saves an amount St > 0 in period t and receives an interest n on each unit saved in period t. Suppose that there is now a tax if on interest income received on saving. This means that if n5} is the total interest income received in t+1, then the household effectively receives 1 t proportion of this interest income

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