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Consider a two-period economy that has at the beginning of period 1 external wealth of 100. GDP in both periods is 120. The interest rate in periods 1 and 2 is 10 percent. In period 1, the country runs a current account decit of 5 percent of GDP. At the end of period 2, the external wealth must be equal to zero. 1. Find the level of the trade balance in period 1, the level of the current account balance in period 1, and the country's external wealth at the beginning of period 2. 2. Is the country living beyond its means? To answer this question, nd the country's current account balance in period 2 and the associated trade balance in period 2. Is this value for the trade balance feasible? [Hintz Keep in mind that since expenditures cannot be negative, the trade balance cannot exceed GDP]. 3. Now assume that in period 1, the country runs instead a much larger current account decit of 10 percent of GDP. Find the country's external wealth at the end of period 1. Is the country living beyond its means? If so, why? 4. What is the maximum current account decit (as a share of GDP) that this country can have at time 1 and still live within its means? 1) In the endogenous growth model presented in Chapter8, suppose that u represents the fraction of time spent working (as opposed to accumulating human capital) and b represents the efficiency of human capital accumulation. The growth rate of human capital equals (3 points) A) u(1 - b) - 1. B) b(1 - u). C) (1 + b) (1 - u). D) b(1 - u) - 1.Consider a variation to the baseline Solow growth model without population or technological progress. The per-capita production function is given by yt = f(kt) = kta, where 0