Take the Neoclassical Growth model we studied in class where we had a tax on consumption, labor income, tax on capital income less depreciation, and government spending. Now suppose there is no tax on capital income net of depreciation. There is a tax on investment and there is a tax on interest income. Also, assume that investment is subject to a tax rate as well. The consumer's budget constraint is therefore (1+tc)ct + (1+Ty)xt + bt+1 = (1-th)wtht + rkt + (1+it(1-t;)) bt +Trt + The government's budget constraint is gt +Trt= thwtht + Tect + TyXt + tiitbt Which of these is the no arbitrage condition? it = rt - 5 a. it (1-T;)=1t - 0 O b. 1+it (1-ti) = [rt +(1-0)](1+tx)