... war steady-state, but the relatively shortduration of the war prevents it from ever reaching that steady-state. After the war the econ-omy transitions slowly back to its pre-war steady-state. ... fully discuss tax policy, for this chapter we will assume that the gov-ernment levies a very special kind of tax: a lump-sum tax. That is, the government an-nounces a spending plan and then ... is at its pre-war steady-state, that in periods 6-1 5 the economy is in a war, withincreased government spending, and in periods 1 6-3 0 the economy is back at peace. Dur-ing the war the economy...