Consider a two-period small open economy without production and a representative household, which lives for two periods. It receives endowments in the first period (Q1) and second period (Q2), respectively. The household inherits no wealth and optimally decides how much to onsume in the first period (C1) and second period (C2) as well as international bond holdings (B1) in the first period, which pays the interest rate R. Household preferences are given by U(C1; C2) = log(C1)+log(C2). Suppose there is a temporary increase in first period endowment Q1 by Delta, vhile period 2 endowment stays the same at Q2. How will the Trade Balance in period 2 (TB2) change? O a. TB2 will be roughly unaffected O b. TB2 will decrease O c. TB2 will increase d. Impossible to tell from the provided information

Consider a two-period small open economy without production and a representative household, which lives for two periods. It receives endowments in the first period (Q1) and second period (Q2), respectively. The household inherits no wealth and optimally decides how much to onsume in the first period (C1) and second period (C2) as well as international bond holdings (B1) in the first period, which pays the interest rate R. Household preferences are given by U(C1; C2) = log(C1)+log(C2). Suppose there is a temporary increase in first period endowment Q1 by Delta, vhile period 2 endowment stays the same at Q2. How will the Trade Balance in period 2 (TB2) change? O a. TB2 will be roughly unaffected O b. TB2 will decrease O c. TB2 will increase d. Impossible to tell from the provided information

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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