Can I have some help with this

Question 5: Consumption smoothing and the intertem- poral budget constraint (based on chapter 6) Consider an infinite lived country that produces output of 40 every year. The world interest rate is 10%. Consumption is 40 every year and investment = government expenditures are equal to zero. 1. There is an unexpected drop in output in year 0, so output falls to 30 and is then ex- pected to return to 40 in every future year. If the country desires to smooth consump- tion, how much should it borrow in period 07 What will the new level of consumption be from then on? 2. Repeat the previous question but now assume that output falls from 40 to 30 in year 0 and in year 1, and then returns to 40 in every future year. Note: when calculating the smooth desired level of consumption, use the fact that 1_1_;_'_ 1 2| 1 3| _ 1+R 1+R) "\\Vi+R) " R 3. Compare the increase in borrowing in parts 1. and 2. Provide intuition for your