first model = A two-period small open-economy (SOE) model.

Suppose, as in Chapter 10, that in the Grist mode in this chapter there is limited commitment in the credit relationships between the SOE and the rest of the world. Some portion of the nation's capital stock, denoted by K, is collateralizable on world markets. This collateralizable capital is illiquid in the current period and is valued at price p on world markets in the future period. Assume that borrowing by the SOE on world markets is limited by the value of collateralizable wealth in the future period. Now, suppose that p falls. How does this affect consumption in the SOE in the present and the future, and the current account surplus? Explain your results with the aid of diagrams. Which diagram represents the national present-value budget constraint in this scenario and the resulting change from a decrease in p? O A. O B. A A C'+G HI B C'+G' F D C+G F B C+G OC. OD. A D TI C'+G' C'+G' H P F D C+G D C+G