Question
Answer True or False. explain your answer Suppose that there is anasymmetricpermanent shock to theendowmentsin a two-period economy. In particular, assume that the new endowments
Answer True or False. explain your answer
Suppose that there is anasymmetricpermanent shock to theendowmentsin a two-period economy. In particular, assume that the new endowments are equal toQ1=Q1+andQ2=Q2+(1+r), whereQ1andQ2are the endowments before the shock. Assume that <0,r>0, and thatB0= 0. Use the logarithmic model of chapter 3 (U=ln(C1) +ln(C2)) to explain if the following statement is true or false: "With this asymmetric permanent shock to the endowments, the change in consumption in period-1 is equal to, the change in consumption in period 2 is equal to(1+r), and the change in the trade balance in the first period AND the change current account in the first period are both equal to zero." show step by step your algebraic calculations and a graph.
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