Question
true or false (with explanation please : In the two-period model reviewed in class, both theCurrent Account and the Trade Balance inperiod 1 worsen(i.e.,
true or false (with explanation please : "In the two-period model reviewed in class, both theCurrent Account and the Trade Balance inperiod 1 worsen(i.e., decrease) with ananticipatedincrease in the endowment ofperiod two (Q1=0 and Q2>0)''
I know I have to use theequationsof the optimal allocation of consumption in periods 1 and 2, the trade balance in period 1 and the current account in period 1 to support the answer.
& for simplicity, assume the following lifetime utility function:
U(C1,C2)= ln(C1) + ln(C2)
Note that the subjective discounting factor is 0<<1!
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