The typical household behaves according

Reference no: EM13721037

Assume that the typical household behaves according to Irving Fisher's two-period model, that 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 the average consumer does not believe that he/she or anyone in the family will ever have to pay higher taxes in the future to offset the current cuts.

Reference no: EM13721037

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