Which expression below represents the change in wealth in period 0? Use the following notation: Δ denotes change, Wt is external wealth at time t, TBt is the trade balance during time period t, and r* is the constant real interest rate. Assume that net labor income from abroad is zero, there are no capital gains on external wealth, and there are no unilateral transfers.
1. W-1 = TB0 + r*W-1.
2. Δ W0 = TB0 + r*W-1.
3. Δ W0 = Δ TB0 + (1+r*)W-1.
4. W0 = TB0 + (1+r*)W-1.