Exercise 9.2 (A Sudden Stop, I) Consider atwoperiod small open econ- omy populated by a large number of households with preferences captured by the following lifetime utility function 111(01Tci\") + 111(CE'CV), where C?" and CE , for t : 1, 2, denote consumption of tradable and nontrad- able goods in period t, respectively. Households are endowed with Q? : 1 and Q31 2 2 units of tradables and Q?! 2 Qt\" = 1 units of nontradables in periods 1 and 2. Households start period 1 with no assets or debts. The world interest rate is zero. 1. Calculate the equilibrium levels of the current account and the relative price of nontradables in terms of tradables in period 11 denoted CA1 and p1, respectively. 2. Suppose now that suddenly the world interest rate increases from II] to 10 percent. Calculate the new equilibrium levels of the current account and the relative price of nontradables in terms of tradables in period 1