ECON 434 1. (25 points total) Consider the inter-temporal model with two t=0 and 1. Home is a small open economy that can borrow and lend in th at a fixed world real interest rate of 5%. In the first period output is > Because of a deteriorating environment, output in the second period is e fall to X1=150. The country wants to smooth consumption as much as The country begins with no external assets or liabilities. a. (5 points) Solve for the optimal level of consumption consist perfect consumption smoothing, the current account, and finand in the first period (t=0). b. (5 points) Solve for NFIA, the trade balance, and the current the second period (period 1)