l. (Equilibrium in the TNT Model with Production) Consider a two-period small open eronomy that produces and consumes tradable and nontradable goods. In periods t = l, 2, the production possibility frontier (PPF) is of the form where QT, and QiN denote, respectively, tradable and nontradable out- put in periods t = l, 2. Preferences are described by the utility function In (0%) + In (CiV) + In 4 where and Civ denote, respectively, tradable and nontradable con- sumption in periods t = 1, 2. Let p, PIN denote the relative price. of nontradable goods in terms of tradable goods in periods t = l, 2. (a) Suppose that p, is equal to I (i.e., one unit of nontradable goods sells for 1 unit of tradable goods). Using the information provided by the PPF, and assuming that firms producing tradables and nontradables are profit maximizers, calculate output of tradables and nontradables in period I (QIT and QIN). (b) Using the results obtained thus far, and the market clearing con- dition in the, nontraded sector, calculate consumption of nontrad- ables in period I (CIN). (c) Assuming that households are utility maximizers use the informa- tion given abow and the results of the previous two questions to calculate consumption of tradables in period I (d) Calculate the country's trade balance in period I (T 131). (e) Suppose that the initial net foreign asset position, Bo, is nil. Cal- culate the current account in period I (CAD. (f) Suppose. that the world interest rate, denoted , equals O percent (r* = O). Assume further that households have access to the world financial market. Calculate. consumption of tradables in period 2