Assume That the Typical Household Behaves According to Irving Fisher's

question 31

Essay

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. Illustrate graphically how a tax cut in period one affects consumption in both periods. Assume that the average consumer does not believe that he or she or anyone in the family will ever have to pay higher taxes in the future to offset the current cuts.

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