Consider a deterministic small open economy populated by a large number of identical individuals receiving an endowment of income in every period. The preferences of the representative individual are described by the intertemporal utility function U₁ = Σt=0ẞtu(ct), with ß = 1/(1 + p). In every period the representative individual faces the budget constraint C++ (1+r)dt−1 = yt + d₁. The initial asset holding is given by d_1 = 0. The foreign sector lends/borrows at the interest rate r* = p. All variables and parameters have standard interpretation. The endowment income changes over time according to y₁ = λty, where y > 0 for t≥ 0 and 1 < 1 < 1 + r. The economy faces the credit constraint dt ≤ 0. Assume that as a result of international negotiations, the foreign sector credit constraint is removed immediately, i.e. from period t=0 onward. Describe the effects of these negotiations on consumption, assets, trade balance and current account and provide economic interpretation. [max 650 words]