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Question: Assume an economy with 100 identical consumers. In the current period each consumer receives 16 units and pays taxes of 6 units, while in the future, each receives income of 20 units and pays taxes of 9.50 units. The government purchases 800 units in the current period and 740 in the future period. The real interest rate is 5%. Using the two-period consumption model:

a) What is the lifetime wealth for each consumer?

b) Does the government's present value budget constraint hold (yes / no)?

c) What is aggregate private saving?

d) What is aggregate consumption?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93120316

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