Question 2 The lifetime consolidated budget constraint for an economy at time t which faces a constant interest rate r can be written as Bi-1 tits - gets + STits P+ 8=0 (1 +r) $=0 (1+r) where Be-1 represents the outstanding debt of the country at time t. The the first term on the right hand side represents the fiscal surplus and the second term represents the seigniorage revenues. Consider an economy in the euro- zone, which has an independent fiscal policy but cannot print its own money. Assume that at the beginning of time t, this economy has an outstanding debt of 340 billion euros. and that the price level at time t Pe = 1. Assume also that this economy has to commit to a constant value of the fiscal surplus (or deficit) t - g from period t onwards. (a) What are the seigniorage revenues for this country? (b) Given an interest rate of 5 percent, what numerical value of the surplus will satisfy the government budget constraint? (c) Suppose that the country can only commit to a surplus of 5 billion euros each year. At a 5 percent interest rate, what would we expect to happen? Give a precise numerical