Question: Need help with this economics question. I have attached a screenshot. Consider a two-period lived representative agent for an economy, whose preferences for consumption are

Need help with this economics question. I have attached a screenshot.

Consider a two-period lived representative agent for an economy, whose preferences for consumption are described by the lifetime utility function U = InCl + InC2 a. Compare the effects of a temporary and a permanent income fall on current account. Suppose that the output of the economy in the two periods are 100 (Yl) and 100 (Y2), and ris 5%. b. c. Does the economy run a trade balance deficit or surplus in period 1? How about period 2? Explain your answer with a graph. How would answer to part b change if Yl and Y2 are 150 and 50 respectively? Explain your answer with a graph.

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