Question: Answer True, False or Uncertain. Briefly explain your answer. No credit without explanation. An increase in uncertainty leads to an increase in precautionary saving and

Answer True, False or Uncertain. Briefly explain your answer. No credit without explanation.

An increase in uncertainty leads to an increase in precautionary saving and to an improvement in the current account in the first period. To answer this question use a two-period model without production and assume incomplete asset markets. Support your answer with graph and equations.

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