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5.Use the intertemporal theory of net exports with the standard assumptions (investment spending is 0). In an exogenous change, current production increases by 22 and
5.Use the intertemporal theory of net exports with the standard assumptions (investment spending is 0). In an exogenous change, current production increases by 22 and future production falls by 2. Explain, using numbers, how the exogenous change affects consumer spending, net exports, and foreign bonds held by domestic residents in the current period. Comment on what happens in the future period. The foreign real interest rate and the marginal rate of time preference equal 0.
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