Please explain if the following statement is true or false: In the two-country period model...
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Accounting
Please explain if the following statement is true or false:
In the two-country period model reviewed in class, the response of the Current Account to a temporary but positive Terms of Trade shock is SMALLER than its response to a permanent but positive Terms of Trade shock. Use equations to support your answer.
For simplicity assume a logarithmic utility function
U=ln(C_1) + ln(C_2).
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