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Consider a 2-period open economy model discussed in class with the following budget constraint for period 0 and 1. where C and Q denote consumption
Consider a 2-period open economy model discussed in class with the following budget constraint for period 0 and 1. where C and Q denote consumption and output. For simplicity there is no government nor investment. Let Q0 = 100 , Q1 = 110, r = 10%. What is the optimal trade balance when the representative household's utility is given by U(Co, C1) = min {Co, C1}
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