1. Consider a two-period economy with lump-sum taxes. Suppose ment announces a tax cut of 10 in period 1 holding government spending constant in periods 1 and 2. (i.e., ATi assuming no debt inherited from period 0, i.e., Bo 10 percent. the govern -10, AG AG2 0.) We are 0. Suppose the interest rate is (a) Calculate the change in taxes in period 2, AT2. (b) Calculate the change in the primary and secondary fiscal deficits in pe- riod 1 (c) Calculate the change in the primary and secondary fiscal deficits in pe- riod 2

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