1.) Imagine that the economy is hit by destructive hurricane Florence, which aff

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1.) Imagine that the economy is hit by destructive hurricane Florence, which affects the total factor productivity. What are the equilibrium effects of this? (Determine how equilibrium c, n, Y, and w change.) Make assumptions if necessary and clearly state them.

2) Suppose that the substitution effect dominates the income effect when the market price changes. Further suppose that the government increases the spending and use it for the improvment on infrastructure in the economy (i.e., building bridges and constructing roads, etc.). What are the equilibrium effects of this?

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