If We Lower Taxes Today but Raise Them in the Future

question 61

Multiple Choice

If we lower taxes today but raise them in the future, and if $\beta$ = 1:

• A) households' wealth rises because they save less
• B) households will increase today's consumption
• C) present wealth remains unchanged and consumption does not change
• D) the government can rely on households to spend more today
• E) saving today will fall and lifetime consumption rises

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