ECON 3C03 CUNY Brooklyn College Inter Temporal Budget Constrain Discussion In 2009, the Government of Canada introduced Tax-Free Savings Accounts (TFSAs). The rules for TFSAs allowed Canadian citizens and residents over the age of 18 to open an account and contribute up to $5,000 per year. While contributions to TFSAs are not tax deductible, investment income (interest, dividends capital gains etc.) earned on assets held in a TFSA are exempt from taxation. Withdrawals of principal and investment income from TFSAs are not taxed. (a) Suppose an individual receives income I0 = $10, 000 in period 0 and I1 = $0 in period 1. Sketch the inter-temporal budget constraint associated with a TFSA. Compare this budget constraint to the budget constraint that pre- vailed before TFSAs were introduced. (b) Will TFSAs increase private saving in the setting described in part (a)? Your answer should reference the economic theory and empirical evidence…    read more