68Schmitt-Grohé, Uribe, Woodford2.6ExercisesExercise 2.1 Indicate whether the following statements are true, false, oruncertain and explain why.1. An economy that starts with a positive net international investmentposition will run a trade balance deficit at some point.2. A country has been having trade balance deficits for 45 years. Fourdecades ago, the country was a net creditor, but after so many tradedeficits it became a debtor. Clearly, this economy will have to runtrade surpluses at some point.3. A two-period economy runs trade surpluses in both periods. It followsthat the current account in period 1 can have either sign (dependingon the magnitude of TB1), but the current account in period 2 mustbe positive.

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68
Schmitt-Grohé, Uribe, Woodford
2.6
Exercises
Exercise 2.1 Indicate whether the following statements are true, false, or
uncertain and explain why.
1. An economy that starts with a positive net international investment
position will run a trade balance deficit at some point.
2. A country has been having trade balance deficits for 45 years. Four
decades ago, the country was a net creditor, but after so many trade
deficits it became a debtor. Clearly, this economy will have to run
trade surpluses at some point.
3. A two-period economy runs trade surpluses in both periods. It follows
that the current account in period 1 can have either sign (depending
on the magnitude of TB1), but the current account in period 2 must
be positive.

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