1.From 2015 to 2016 a country's output rose from 20,000 to 25,000, its capital stock rose from 10,000 to 12,000, and its labor force declined from 12,000 to 9,000. Suppose the elasticity of output with respect to capital and labor are equal to 0.3 and 0.7, respectively.

a)How much did capital contribute to economic growth over the year?

b)How much did labor contribute to economic growth over the year?

c)How much did productivity contribute to economic growth over the year?

2.Consider an economy described by the following equations: Y= C+I+G

Y=5,000 G=1,000; T=1,000

C=250+0.75 (Y-T),

I=1,000-5000 r

a)In this economy, compute private saving, public saving, and national saving.

b)Find the equilibrium interest rate.

c)Now suppose that G rises to 1,250. Compute private saving, public saving, and national saving.

d)Find the new equilibrium interest rate.