Balance of Payments I: The Gains from Financial Globalization - End of Chapter Problem Assume that a country produces an output Q of 50 every year. The world interest rate is 10%. Consumption C is 50 every year, and I = G = 0. There is an unexpected drop in output in year 0, so output falls to 28 and is then expected to return to 50 in every future year. The country chooses to smooth its consumption by borrowing in period 0. a. After borrowing in period 0, what will the new level of consumption be from then on? 539 Incorrect b. How much should the country borrow in period ( to smooth consumption from then on? 2 Incorrect