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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
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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