Answered: 5. According to Feldstein [2008b],… | bartleby

Microeconomic Theory

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.11P

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5. According to Feldstein [2008b], "only about
10% to 20% of a one-time tax rebate provided
to taxpayers in 2008 was spent immediately.
Using the life-cycle model of Figure 18.7,
explain why this result could have been pre-
dicted. (Hint: Think about how a one-time rebate
affects the endowment point and budget con-
straint in Figure 18.7. Contrast this to how a
permanent rebate affects the endowment point
and budget constraint.)
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