4.8. Exercises 1. Consider a positive capital depreciation rate 6 > 0. In this case, the asset-accumulation equation becomes K. = (Rt 5m. + tht 0.. (421) Show that the steadystate equilibrium level of labour 1* is given by5 4. _1+T_%(13)' which continues to be independent of technology A. In other words, changes in the level of technology A do not aect the steadystate equilibrium level of labour l* even in the presence of capital depreciation. Furthermore, (4.22) shows that the steady- state equilibrium level of labour 1* is increasing in the capital depreciation rate 6 and decreasing in the discount rate p. Intu- itively, an increase in the capital depreciation rate 6 or a decrease in the discount rate p reduces the consumption rate 0 / Y, which in turn decreases leisure and increases labour. 1* (4.22)