1.) In an economy, the households are saving 20% of their disposable income, which adds up to $5 of private saving. The external/international saving is O. The government collects $6 in income tax and still runs a deficit of $1. The firms' real marginal product of capital function is MPK = 0.1/1 Find the output (use the fact that it is equal to the gross income).

2.) Continue from the previous question. Find the disposable income.