Write down the governments present

Reference no: EM133711217

Question: Suppose that instead of running deficits, the government runs a loan program that lends L units of final goods to consumers at the market real interest rate r financed by lump-sum taxes T. When loans are repaid, the government rebates this quantity to the consumers in the form of lump-sum transfers T' (negative taxes). Write down the government's present- value budget constraint, the consumer's lifetime budget constraint, and show that the program's size does not change the consumer's optimal choice. We can assume G = G' = 0.

Reference no: EM133711217

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