2} (20 points total] Suppose we have an emerging economy with a current GDP of $100 billion. It borrows $20 billion at a real interest rate of 5%, which it plans to repay next year. The costs of default are 25% of GDP. Consider 2 scenarios: Scenario A: GDP next period is $100 billion Scenario B: GDP next period is $80 billion a) (10 points} Assuming scenario A, is it in the best interest of this emerging economy to pay its debt or default? Show all work and explain. b) (ill points} Assuming scenario B, is it in the best interest of this emerging economy to pay its debt or default? Show all work and explain. c) (20 poqu} Now draw a repayment vs. default diagram with consumption on the vertical axis and GDP on the horizontal axis {as in the textbook and lecture). Assuming scenario A, label this point as point A. Similarly, assuming scenario B, label this as point B. Be sure your diagram is completely labeled with a consumption if you default line, a consumption if you pay line, slopes labeled as well as repayment threshold level of GDP (YT) and the default f repayment zones. Please show your work calculating YT