Problem 2. Analyze the effects of the following events on the equilibrium values of the real wage, employment, output, the real interest rate, investment, saving and consumption. Your analysis should...

Extracted text: Problem 2. Analyze the effects of the following events on the equilibrium values of the real wage, employment, output, the real interest rate, investment, saving and consumption. Your analysis should include appropriate graphs and a verbal explanation. (a) A natural disaster destroys a significant amount of the nation's capital stock. (b) A new innovation promises to increase the future marginal product of capital. (Assume that current desired consumption is unaffected by the increase in future income that would naturally follow from increased productivity.)