Spain is a small open economy and faces the real interest rate (r = 0.05) in...

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Spain is a small open economy and faces the real interest rate (r = 0.05) in the international bor- rowing market. For this question, assume that GNE = C. Ie, the country doesn't have government expenditures and makes no investment decisions. a) Suppose that Spain produces 100 units of output every period (from period 0 to infinity): Qt = 100, Vt. Each period, Spain consumes what it produced in that period: c = Qt, Vt. Calculate Spain's Present Value of Consumption (PVC). The country's Present Value Utility Function is represented by: 00 1 c² U=₁ (1 + r)²4 (C₁); = c² - + (1+r) (1 + r)² Where u(c): = c². = + ... (1) Spain is a small open economy and faces the real interest rate (r = 0.05) in the international bor- rowing market. For this question, assume that GNE = C. Ie, the country doesn't have government expenditures and makes no investment decisions. a) Suppose that Spain produces 100 units of output every period (from period 0 to infinity): Qt = 100, Vt. Each period, Spain consumes what it produced in that period: c = Qt, Vt. Calculate Spain's Present Value of Consumption (PVC). The country's Present Value Utility Function is represented by: 00 1 c² U=₁ (1 + r)²4 (C₁); = c² - + (1+r) (1 + r)² Where u(c): = c². = + ... (1)

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Spains present value of consumption PVC is the sum of the discounted ... View the full answer