4.8. Exercises 1. Consider a positive capital depreciation rate 6 > 0. In this case, the asset-accumulation equation becomes Kt = (R.t 5m + Wilt 0.. (4.21) Show that the steadystate equilibrium level of labour 5* is given by'5 1* = (4.22) which continues to be independent of technology A. In other words, changes in the level of technology A do not affect the steadystate equilibrium level of labour 1* even in the presence of capital depreciation. Furthermore1 (4.22) shows that the steady state equilibrium level of labour l\" is increasing in the capital depreciation rate :5 and decreasing in the discount rate ,0. Intu- itively, an increase in the capital depreciation rate 6 or a decrease in the discount rate ,0 reduces the consumption rate C/Y, which in turn decreases leisure and increases labour. 2. Derive the steadystate equilibrium levels of capital K\" and out put Y\