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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
