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2. Suppose that in the OLG model capital depreciates at rate 6. Both capital and labor markets are competitive. (a) Prove that the interest rate

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2. Suppose that in the OLG model capital depreciates at rate 6. Both capital and labor markets are competitive. (a) Prove that the interest rate rt : f'Uct) 6. (Hint: Firms' costs of renting capital include both the interest mte and capital depreciation now.) (13-) How does this change in the model affect the equation that describes kt+1 as a function of kt

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