Within the context of Intertemporal optimization, where a person's lifetime budget constraint is given by

Discuss the implication of the government deciding to decrease current taxes (T1) by $1000, without a corresponding

cut in government spending so they must raise future taxes (T2) to keep the present value of taxes ( T1 +T2/1+r) constant .

Explain what effect this sort of policy will have the effect on consumption and savings and why. (10)