Exercise 6.7 (Complete Asset Markets and the Risk-Free Interest Rate) The model with complete financial markets studied in Section 6.5 assumes that the risk- free world interest rate is nil, r* = 0. Derive the results of that section under the assumption that r* is positive and then answer the following questions: 1. Do households continue to perfectly smooth consumption across states? Explain.2. Do households continue to perfectly smooth consumption across time? Explain. 3. Find the sign of the current account in period 1 and provide intuition. 4. Does the model continue to predict that the level of uncertainty has no effect on the current account? Why or why not? 5. How does the current account in period 1 compare with the one that would obtain in the absence of uncertainty (o = 0)