Government sometimes restricts international borrowing and, Business Economics

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Government sometimes restricts international borrowing and

Government sometimes restricts international borrowing and lending by taxing them. In a two-period, two-country endowment model, if the Home's position is r^A < r^A_* , what's the optimal policy for the Home's government to maximize Home's welfare? Please illustrate your points in the figure. What's the potential consequence of this policy on Home and Foreign economies?

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