Assume the government of Spotifia will exist for only two periods, today and next year. The present value of government spending for the two periods equals $80 Today’s taxes add up to $10. The interest rate is 20%. The assets held by the country are $10. What must taxes be for Spotifia, in absolute value (not present value) next year?

Assume the government of Spotifia will exist for only two periods, today and next year. The present value of government spending for the two periods equals $80 Today’s taxes add up to $10. The interest rate is 20%. The assets held by the country are $10. What must taxes be for Spotifia, in absolute value (not present value) next year?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.5P

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Assume the government of Spotifia will exist for only two periods, today and next year. The present value of government spending for the two periods equals $80 Today’s taxes add up to $10. The interest rate is 20%. The assets held by the country are $10. What is the present value of next year’s taxes in Spotifia? $60 $64 $72 $78 none of the above
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