Problem
Consider a small, open economy that exits for two periods and that has an endowment Yt for each period of the only existing good. Furthermore, assume that such endowments are compatible with the current-account equilibrium. In the short term, the stock of capital in the economy cannot be adjusted, such that a sudden increase in immigration to this economy temporarily reduces per capita capital and, consequently, the per capita income in the economy. This can be modeled as a fall in Y1, with Y2 remaining constant. What should happen to the current account in this country if there is an increase in migratory flow?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.