2. [5 points] Suppose that MPK' = 1500 - 10K , unit price of capital (Pk) = 2000, depreciation = 10%, and the real interest rate = 4%. Use this information to answer the questions below. a. Calculate the user costs. Show work. (use decimals in your calculations: so use d=0.1 and r=0.04) b. What is desired future capital stock (K*) equal to? Calculate it (show work). c. If K+ (current capital) = 100, what is Investment equal to? Calculate it (show work). d. Suppose that the depreciation rate rises. Use a diagram to show the impact of a rise in depreciation on K' (i.e. on the optimal capital stock). (hint: the diagram has K on the x-axis; as in figure 4.3 in the text). Clearly illustrate the impact; label everything, both axes and all curves. e. Continue with d: Now DISCUSS (intuitively) the impact of the rise in depreciation rate. Make sure to provide economic reasoning for the changes in K and Investment. f. EXTRA CREDIT: +1.5 POINTS: Continue with the shock above: use the S-I model/diagram to illustrate and discuss the impact of a rise in the deprecation rate on equilibrium r, I, and S. Make sure to discuss the impact on the economy, why does r change, why do I and S change, and the impact on Y and C as well