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4. Consider the Q model .of investment with adjustment costs. Equilibrium suggests that capital K(t) evolves as K(t) : C'_1(q(t) 1) (normalizing the number of
4. Consider the \"Q\" model .of investment with adjustment costs. Equilibrium suggests that capital K(t) evolves as K(t) : C'_1(q(t) 1) (normalizing the number of rms N : 1 and assuming no depreciation), while the marginal value of capital, q(t) evolves as (t) 2 rq(t) MK (13)), where r is the real interest rate. Note that the capital adjustment cost function, C(I(t)) satises 0(0) 2 0, C'(O) : 0, and C\"(-) > O and the real prot function, MK (1%)), satises 71" ()
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