Assume that there are only two periods: period 1 and period 2. Income in period 1...

 

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Assume that there are only two periods: period 1 and period 2. Income in period 1 for UAE is Y₁ = 100$ billion, while in period 2, income is Y2 = 50$ billions. The international interest rate at which the UAE can borrow and lend is r = 1%. The UAE is an open economy with frictionless trade and frictionless financial markets. That is, at the international interest rate, the UAE can lend or borrow as much as they want, as long as they satisfy their natural borrowing limit. Assume that loans must be fully repaid by the end of period 2. Assume that C2 = C1 = C (people consume the same amount in period 1 and in period 2). Given the numbers for Y₁ and Y2 provided above, and using the intertemporal budget constraint, C is equal to UAE's net exports are (positive/negative) today. today, and the UAE is a net (borrower/lender) Assume that there are only two periods: period 1 and period 2. Income in period 1 for UAE is Y₁ = 100$ billion, while in period 2, income is Y2 = 50$ billions. The international interest rate at which the UAE can borrow and lend is r = 1%. The UAE is an open economy with frictionless trade and frictionless financial markets. That is, at the international interest rate, the UAE can lend or borrow as much as they want, as long as they satisfy their natural borrowing limit. Assume that loans must be fully repaid by the end of period 2. Assume that C2 = C1 = C (people consume the same amount in period 1 and in period 2). Given the numbers for Y₁ and Y2 provided above, and using the intertemporal budget constraint, C is equal to UAE's net exports are (positive/negative) today. today, and the UAE is a net (borrower/lender)

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