Exercise 4.2 (Anticipated Terms-of-Trade Shock) Consider a two-period small open endowment economy populated by a large number of households with preferences given by the lifetime utility function where Ci and C2 denote consumption of food in periods 1 and 2, respectively. Suppose that households receive exogenous endowments of copper given by Q1 = Q2 = 10 in periods 1 and 2, respectively. The terms of trade in periods 1 and 2 are 771 = 772 = 1. Every household enters period 1 with no assets or liabilities inherited from the past, B; = 0. Finally, suppose that the country enjoys free capital mobility and that the world interest rate on assets held between periods 1 and 2, denoted r*, is 5 percent. 1. Compute the equilibrium levels of consumption, the trade balance, and the current account in periods 1 and 2. 2. Assume now that the terms of trade in period 2 are expected to in- crease by 50 percent. Calculate the effect of this anticipated terms of trade improvement on consumption, the trade balance, and the current account in periods 1 and 2. Provide intuition