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Consider the following 2-period model U(C1,C2) = min{4C1,5C2} C1 + S = Y1 – T1 C2...

Consider the following 2-period model U(C1,C2) = min{4C1,5C2} C1 + S = Y1 – T1 C2 = Y2 – T2 + (1+r)S Where C1 : first period consumption C2 : second period consumption S : first period saving Y1 = 20 : first period income T1 = 5 : first period lump-sum tax Y2 = 50 : second period income T2 = 10 : second period lump-sum tax r = 0.05 : real interest rate Find the optimal saving, S*

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