I get first error when change jdk compiler for project from 1.5 to 1.7. Therefore I try to fix it by method in the picture but get the below error.
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Configure JDK as the default runtime. See this - Setting JDK in Eclipse
After which, go to Java Build Path > Remove JRE > Add Library > JRE Library > Set the default JRE as JDK version.
That should do the trick.