Consider a two-period endowment economy populated by identical house- holds with preferences defined over consumption in period 1, and con- sumption in period 2, C2, and described by the utility function In C + E Inc. where C denotes consumption in period 1. C denotes consumption in pe- riod 2, and E denotes the expected value operator. Each period, the econ- omy receives an endowment of 10 units of food. Households start period 1 carrying no assets or debts from the past (B7 = 0). Financial markets are incomplete. There is a single internationally traded bond that pays the interest rate r = 0. 1. Compute consumption, the trade balance, the current account, and national saving in period 1. 2. Assume now that the endowment in period 1 continues to be 10, but that the economy is prone to severe natural disasters in period 2. Sup- pose that these negative events are very rare, but have catastrophic effects on the country's output. Specifically, assume that with proba- bility 0.01 the economy suffers an earthquake in period 2 that causes the endowment to drop by 90 percent with respect to period 1. With probability 0.99, the endowment in period 2 is 111/11. What is the expected endowment in period 2? How does it compare to that of period 1? Consider a two-period endowment economy populated by identical house- holds with preferences defined over consumption in period 1, and con- sumption in period 2, C2, and described by the utility function In C + E Inc. where C denotes consumption in period 1. C denotes consumption in pe- riod 2, and E denotes the expected value operator. Each period, the econ- omy receives an endowment of 10 units of food. Households start period 1 carrying no assets or debts from the past (B7 = 0). Financial markets are incomplete. There is a single internationally traded bond that pays the interest rate r = 0. 1. Compute consumption, the trade balance, the current account, and national saving in period 1. 2. Assume now that the endowment in period 1 continues to be 10, but that the economy is prone to severe natural disasters in period 2. Sup- pose that these negative events are very rare, but have catastrophic effects on the country's output. Specifically, assume that with proba- bility 0.01 the economy suffers an earthquake in period 2 that causes the endowment to drop by 90 percent with respect to period 1. With probability 0.99, the endowment in period 2 is 111/11. What is the expected endowment in period 2? How does it compare to that of period 1