An open economy's output is expected to be 100 units forever and it can borrow and lend

freely from the rest of the world at an interest rate 10%. Assume that the initial wealth is

zero and there are no unilateral transfers. An investment opportunity for this economy

arises whereby an investment of 45 units in the first period (i.e., t = 0) will increase its

output by 10 units forever thereafter (i.e., from t = 1 onwards). However, in t = 0 the output

will remain at 100. Shall the economy borrow and undertake this investment? If the

economy always chooses a smooth consumption, what will be the consumption level that it

will choose? What will be the trade balance in period 0? What will be the wealth level at

the end of period 0? What is the trade balance, NFIA, Current account, and wealth level at

the end of period 1, 2, 3,...[10 points]