1. (Based on FT 17.1 - External Wealth Changes) Answer the following questions on the changes in External Wealth (use the equations and notations discussed in class and the chapter 17 of FT ). Assume the NFIA is zero, no capital gains on external wealth, and no unilateral transfers. (a) Express the change in external wealth (W0) at the end of period 0 as a function of the economy's trade balance (TB), the real interest rate (a constant r ), and initial external wealth (W1). (b) Using the result in (a), write an expression for the stock of external wealth at the end of period 0(W0). This should be written as a function of the economy's trade balance (TB0), the real interest rate (r), and initial external wealth (W1). (c) Using (a) and (b), write an expression for the stock of external wealth at the end of period 1 (W1). This should be written as a function of the economy's trade balance (TB) each period, the real interest rate, and initial external wealth. (d) Using your answers from (a), (b), and (c), write an expression for the stock of external wealth at the end of period 2(W2). This should be written as a function of the economy's trade balance (TB) each period, the real interest rate, and initial external wealth. (e) Suppose we require that W2 equals zero. Write down the condition that the three trade balances (in periods 0,1 , and 2 ) must satisfy. Arrange the terms in present value form