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2) The work-leisure decision and the one period model of the macroeconomy (6 marks) i) Show...

2) The work-leisure decision and the one period model of the macroeconomy

i) Show that a consumer is better off with a lump sum tax than with a proportional tax as wage income given that either tax yields the same revenue for the government. Show this using a diagram and in words.

ii) Provide an example of a lump sum tax in the real world. (1 mark)

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