Assume that a country's production function is Y=K^0.7 L^0.3. The ratio of capital to output is 3, and the depreciation rate is 4 percent. Capital is paid its marginal product.

a. What is the marginal product of capital in this situation?

b. What is the real interest rate in this economy?

c. Suppose that there is technological progress so that the production tomorrow is given by Y=AK^0.7L^0.3 where A is some number greater than 1. How does this affect investment demand?

d. Suppose consumption is given by C= 0.5Y, and there are no government taxes or spending. How does the technology change, described above, affect investment and the real interest rate today?