The Current Account in a 2-period Model Fictional country Gondal² is choosing to borrow and lend with the rest of the world. It is small, so its actions have no effect on the world interest rate, which is r = 0.21 between period 1 and 2. In two years, Gondal plans to cut off contact with the rest of the world, and so all debts have to be repaid in period 2. Gondal has utility +B: 1 where = 2 and 3 = 0.81. The growth rate of GDP in Gondal is 10 percent, i.e. /2 = 1.1. Denote the current account of Gondal in each period by ₁ and 22. 1. What is Gondal's budget constraint?

The Current Account in a 2-period Model Fictional country Gondal² is choosing to borrow and lend with the rest of the world. It is small, so its actions have no effect on the world interest rate, which is r = 0.21 between period 1 and 2. In two years, Gondal plans to cut off contact with the rest of the world, and so all debts have to be repaid in period 2. Gondal has utility +B: 1 where = 2 and 3 = 0.81. The growth rate of GDP in Gondal is 10 percent, i.e. /2 = 1.1. Denote the current account of Gondal in each period by ₁ and 22. 1. What is Gondal's budget constraint?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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