2) (70 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) (10 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 points) 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 / repayment zones. Please