Problem
1. What would happen to revenue from seignorage if the inflation rate is very high?
2. Consider the effect of a tax cut (if government spending remains the same) in a country with an underdeveloped financial system.
a) Assuming individuals are forward looking (i.e., the Ricardian equivalence argument holds), what do you think might happen to national saving in this case?
b) How do you think forward looking individuals might overcome the limitations of an underdeveloped financial system?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.