Consider a two-period endowment economy model of a small open economy. In the first period, households receive an endowment ofQ1=10and in the second period, they receive an endowment ofQ2=15. The initial external wealth is zero. Households can save or borrow at the interest rater=0.5 (50% interest rate).

What is themaximumtrade deficit that this country can have at time 1 that is sustainable with the intertemporal budget constraint?

Select one:

TB1-10

TB1-20

TB1-25

TB1-15

TB1-5