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Practical Management Science

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter7: Nonlinear Optimization Models

Section: Chapter Questions

Problem 69P

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PLEASE ANSWER

Consider an economy that lasts for two periods, period 1 and period 2. Let TBị denotes the trade bal-
ance in period t, CA¡ the current account balance in period 1, and Bj the country's net international
investment position at the end of period 1. Let r denote the interest rate paid on assets held for one
period. Assume net international payments to employees, net unilateral transfers, and valuation changes
are always equal to zero, so that in period t = 1, 2:
CAŁ = rB_1 = TB;
(1)
%3|
and
CA = B; – B"_1
(2)

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