題組內容
4. (25%) Consider a simple two-period model where the world lasts only for two periods. An agent has one unit of labor and provides the labor to the market inelastically. The agent's budget constraints in the two periods are:
$$c1 + b1 = w_1$$
$$c2 = b1(1 + r1) + w2$$
where $b1$ is the asset position of the agent in period 1, $w1$ and $w2$ are the real wage rate in periods 1 and 2, and $r1$ is the real interest rate from period 1 to period 2. The production technology in this economy is
$$Y = AL$$
for both periods, where $L$ is total number of workers or agents in the economy. All markets are competitive. Answer the following questions.
(b) \( (3\%) \) Derive the two-period intertemporal budget constraint for the agent. Plot it on the \( (c{1}, c{2}) \)-space.
Suppose that there is a government collecting taxes from and providing services to the agents in the economy. The government can choose to impose a consumption tax, a capital income tax or a labor income tax on the household.