Consider a two-period lived representative agent for an economy, whose preferences for consumption are described
by the lifetime utility function U = lnC_1 + lnC_2 The output of the economy in the two periods are 50 (Y_1) and 200 (Y_2), and r is 5%.
a) Does the economy run a trade balance deficit or surplus in period 1? How about period 2? Explain your answer with a graph
b) How would your answer in a change if the output in period 2 becomes 30 only? Explain your answer with a graph.
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