1. Welfare and the terms of trade. Let the representative individual in a small open economy maximize...

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1. Welfare and the terms of trade. Let the representative individual in a small open economy maximize U(C1, C2) subject to C + C/(1+r) Y+ Y2/(1+r), where Y and Y2 are fixed.

(a) Show that the intertemporal Euler equation takes the form aU (C1, C2)/aC = (1+r)au(C1, C2)/aC2.

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Foundations Of International Macroeconomics

ISBN: 9780865716513

1st Edition

Authors: Rogoff, K.

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Question Posted: Nov 13, 2024 03:00 AM

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Foundations Of International Macroeconomics

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