Question: only need help with last question Consider a two-period economy populated by households with preferences described by the utility function U 211101 4-31an In this

 only need help with last question Consider a two-period economy populated

only need help with last question

by households with preferences described by the utility function U 211101 4-31an

Consider a two-period economy populated by households with preferences described by the utility function U 211101 4-31an In this economy, the household starts period 1 with non-zero assets (BE:t O) and receives endowments Q1 and Q2 in periods 1 and 2, respectively. The economy has free capital mobility, and the world interest rate is positive (r*>0). Note that this utility function is different relative to the one used in Chapter 3. copyright 4.8) (12 points) Calculate the equilibrium levels of consumption, the trade balance and the current account in period 1 (CLTBl and CA1) and the equilibrium level of consumption in period 2 (C2). Do not forget to show step by step your algebraic calculations. Explain in detail your economic intuition. No credit without explanation. 4.3) (12 points) Suppose that there is an asymmetric permanent shock to the endowments. In particular, assume that the new endowments are equal to Q'1 =Q1+6 and Q'2=Q2+6(1+r*), where Q1 and Q2 are the endowments before the shock. Assume that 6:50 and B=1. Calculate the change in consumption in period 1 (AC1), the change in consumption in period 2 (AC2), the change in the trade balance in the first period (ATB1), AND the change current account in the first period (ACA1)

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