A. Intertemporal Trade based on Different Time Prefences. Assume that the Home and Foreign country have the same technology with respect to present and future production (and converting that into present and future consumption). Also assume with respect to the time preferences for consumption, that the Home Country tends to be more impatient than Foreign. Second period production and consumption is on the vertical axis and first period production and consumption is on the horizontal. Given differences in time preferences, as given by CIC and CIC, show the outcome under autarky. Compare the discount (interest rate), r and r*, between the two countries. Then determine what happens when inter-temporal trade is allowed between the two countries. Make sure that you (1) depict production and consumption for both countries with trade, (ii) indicate what is exported and imported, (iii) state which country is the lender and which one is the borrower, and (iv) state whether each country's current and capital account is running a surplus or a deficit. (Hint: with trade, both countries face the same discount rate and produce at the same point on the PPF). 2.2.1 g. 9 Current Account: Capital Account: Foreign Current Account: Foreign Capital Account: A. Intertemporal Trade based on Different Time Prefences. Assume that the Home and Foreign country have the same technology with respect to present and future production (and converting that into present and future consumption). Also assume with respect to the time preferences for consumption, that the Home Country tends to be more impatient than Foreign. Second period production and consumption is on the vertical axis and first period production and consumption is on the horizontal. Given differences in time preferences, as given by CIC and CIC, show the outcome under autarky. Compare the discount (interest rate), r and r*, between the two countries. Then determine what happens when inter-temporal trade is allowed between the two countries. Make sure that you (1) depict production and consumption for both countries with trade, (ii) indicate what is exported and imported, (iii) state which country is the lender and which one is the borrower, and (iv) state whether each country's current and capital account is running a surplus or a deficit. (Hint: with trade, both countries face the same discount rate and produce at the same point on the PPF). 2.2.1 g. 9 Current Account: Capital Account: Foreign Current Account: Foreign Capital Account