In a two-period world, the government has committed to never…
In a two-period world, the government has committed to never using seignorage to repay the debt, so only taxes and government purchases matter for the intertemporal government budget constraint. In this country, the constitution says that taxes = T = 150 each period, and current government purchases are 250 now. The interest rate (r) is 40% (as usual, think of a big interest rate like this as a generational interest rate if you find that helpful). What will government purchases be in the second period? Answer with a number: If you think the answer is 400, just write 400 as usual.