If we lower taxes today but raise them in the future, and $\beta = 1$
, present wealth remains unchanged and consumption does not change.

Question

If we lower taxes today but raise them in the future, and $\beta = 1$ 
, present wealth remains unchanged and consumption does not change.

Quizplus · Accepted Answer

If $\beta = 1$, it implies that individuals are perfectly forward-looking and discount future utility at the same rate as the present. Therefore, they will adjust their savings to offset future tax changes, keeping their present wealth and consumption unchanged.

If We Lower Taxes Today but Raise Them in the Future