A Two-Period Small Open-Economy Model C' + G' Y(1 + r) + Y' B D A Y+Y'/(1+r) C + G The representative consumer chooses current private consumption plus government consumption in the present and the future, given the world real interest rate. The optimal choice is at point D, and the current account surplus is CA = Y - C - G.(a) In a small open economy model determine the effects of a persistent decrease in total factor productivity on domestic output, consumption, investment, and the current account surplus. Draw diagrams for the labour and goods markets, the production function and provide explanation. (b) In the equilibrium small open-economy model, suppose that current total factor productivity decreases. If the exchange rate is flexible, Using diagrams determine and explain the effects on aggregate output, absorption, the current account surplus, the nominal exchange rate, and the price level. Repeat for the case of a fixed exchange rate