Question
Explain if the following statement is true or false: In the two-country period model reviewed in class, the response of the Current Account to a
Explain if the following statement is true or false:"In the two-country period model reviewed in class, the response of the Current Account to a PERMANENT positive INCOME shock is SMALLER than its response to a TEMPORARY positive INCOME shock."
Use equations to support your answer. For simplicity assume a logarithmic life time utility (U=ln(C1)+ln(C2)):
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Economics Today The Macro View
Authors: Roger LeRoy Miller
18th Edition
0133884872, 978-0133884876
