Consider a two-period lived representative agent for an economy, whose preferences for consumption are described by the following lifetime utility function

U = ln(C_1) + ln(C_2)

The output of the economy in the two periods are 50 (Y_1) and 200 (Y_2), and r is 5%

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a) Does the economy run a trade balance deficit or surplus in period 1? What about period 2? Explain your answer and draw a graph to support your answer

b) How would your answer in a change if the output in period 2 becomes 30 only? Explain your answer and draw a graph to support your answer

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