1. Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public saving is $0.2 trillion. Assuming this economy is closed, calculate consumption, government purchases,national saving, and investment.

2. Consider an economy with two labor markets, neither of which is unionized. Now suppose a union is established in one market.

a) Show the effect of the union on the market in which it is formed. In what sense is the quantity of labor employed in this market an inefficient quantity?

b) Show the effect of the union on the non-unionized market.what happens to the equilibrium wage in this market?