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(a) Suppose it is known in advance that at some time t0 the government will confiscate half of whatever wealth each household holds at that time. Does consumption change discontinuously at time t0? If so, why (and what is the condition relating consumption immediately before t0 to consumption immediately after)? If not, why not? (b) Suppose it is known in advance that at t0 the government will confiscate from each household an amount of wealth equal to half of the wealth of the average household at that time. Does consumption change discontinuously at time t0? If so, why (and what is the condition relating consumption immediately before t0 to consumption immediately after)? If not, why not?

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