(c) Explain why the answer in b implies that a country benefits from a rise in the world interest rate if and only if its terms of intertemporal trade improve.

(d) Let W = Y + Y2/(1+r) (that is, W is lifetime wealth in units of date 1 con- sumption). Show that a small percentage gross interest rate increase of = dr/(1+r) has the same effect on lifetime utility as a lifetime wealth change of dW = P(Y- C).