True or False questions. Explain your answer and use the proper diagram and equations when applicable.

(a) Production Economy. Please explain if the following statement is true or false:In the two-period model reviewed in Chapter 5 of Schmitt-Groh e, Uribe, and Wood- ford, a fall in the productivity of the second period (A2) is associated with a fall in the Current Account and the Trade Balance of period 1.Do not forget to show step by step your algebraic calculations and a graph to support your answer. Explain in detail your reasoning.

(b) Use the logarithmictwo-period modelof chapter 4 (U=ln(C1) +ln(C2)) to explain if the following statement is true or false:"Suppose the terms of trade of Canada decrease in both periods, but decrease by less in period 2. That is, the terms of trade depreciate byTT1= <0in the first period and byTT2=12 <0in period 2 (is a positive constant). In this case the current account and the trade balance of Canada should IMPROVE in the first period."Do not forget to show step by step your algebraic calculations. Explain in detail your reasoning. .