Explain using a diagram how a tax cut in period two affects

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Q. Assume that typical household behaves according to Irving Fisher's two-period model, which consumption in both periods is a normal good and that households are initially savers. Explain using a diagram how a tax cut in period two affects consumption in both periods. Assume that average consumer does not believe that he/she or anyone in family will ever have to pay higher taxes in future to offset current cuts.

Reference no: EM1372525

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