Y5

a. [1? points} Assume that you live for two periods and your goal is to smooth consumption {if you can't achieve that, you prefer to get as close as possible to it without throwing any money away}. You know you will earn (net of tastes} 250D baht this year and 46m baht next year. There is no inflation and the interest rate is 10%. Assume the government offers a 50D baht tax deduction, which you expect will lead to an increase in taxes next year of 55!} baht. a} [3 points) Provided you can borrow, nd the difference of your first period consumption in two cases; with and without tax deduction. [Show all your works to get the final answer) b} [4 points) Provided you cannot borrow, find the difference of your first period consumption in two cases; with and without tax rebate. {Show all your works to get the final answer) c} [5 points) Explain the effectiveness of a tax cut in pulling the economy out of a recession. [using the implication from your answers in a} and b) above)