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Find the period 1 equilibrium level of investment, the period 1 and period 2 equilibrium levels of savings, the trade balance, the current account balance, and the country’s net foreign asset position at the end of period 1. Compare your results with those obtained in parts (a)-(c) providing interpretation and intuition.
Consider a two-period model of a small open economy with a single good. Let preferences of the representative household be described by the utility function ln C1 + ln C2, […]
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