International Monetary Economics

Question 2 Consider an infinitely-lived small open economy facing a constant world real interest rate p* = 5% and receiving a constant income flow Not yet answered Y = 2, 000 units of goods in each period, t = 0, 1, 2, . .. . Marked out of In addition, there is an investment opportunity that requires an input of 750 units of goods in period 0 and will generate a constant 10.00 output flow of 50 units of goods for all t 2 1. Flag question The economy has no initial wealth. Government spending Gt = 0 in every period. The residents of the economy prefer to maintain a perfectly smooth consumption pattern, Ct = C, for all t. Determine the economy's optimal aggregate consumption in each period, Ct = C, and net exports in period 1, NX1. (Round your answers to two decimal places.) Consumption in each period, C Net exports in period 1, NX1 If the constant world real interest rate is r* = 8%, what will the optimal consumption be? Consumption in each period, C