Using an overlapping generations model show how government borrowing can transfer income from the young generation to the older generation. Assume there are equal numbers of three generations in a population with each generation 20 years long and each person has a fixed income of $50,000.00 over a 20-year period. There is no private saving where everyone consumes their entire income. This situation is expected to continue forever. If the government borrows $60,000.00 with zero interest to finance public consumption with the loan to be fully repaid by 2045.

(i) Provide a detailed discussion of the case. (3 Marks)

(ii) Use a table to show the elements of an Overlapping Generations Model. (15 Marks)

(iii) State the overall consequence of this policy. (2 Mark)