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Recognize the future increase in taxes

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Suppose the government increases its spending on infrastructure (increase G) by issuing government bonds, which means the government does not increase current taxes but are expected to increase future taxes. Suppose further that households are myopia, meaning that they do not recognize the future tax increase. 1. How would this affects national savings 2. Is the absolute change in national savings bigger than, equal to, or smaller than the absolute change in national savings in a situation where households recognize the future increase in taxes.

Reference no: EM131687390

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