Explain income and substitution effects of the program


Suppose that your household is the beneficiary of a government program that matches any interest you earn. What would that do to your consumption this year? Would you spend more, or less. In your answer, discuss the income and substitution effects of the program. (Hint, as above, this program is unique to you and the economy as a whole does not notice. In your answer, remember to discuss the multiyear budget constraint. When doing so, remember that income effects come from changes in V while substitution effects come from changes in prices.)

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Microeconomics: Explain income and substitution effects of the program
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