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Assume that K * is the rm's desired capital stock and assume that it is xed. It is costly to adjust the capital stock, so

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Assume that K * is the rm's desired capital stock and assume that it is xed. It is costly to adjust the capital stock, so the rm adjusts gradually towards K *. The change in the capital stock is proportional to the gap between the desired capital stock and the current capital stock, where a: is the factor of proportionality that determines the speed of adjustment. Assuming there is no depreciation, and assuming that the initial capital stock at t = 0 is given by K0, What is the steady-state capital stock size? Does K (t) converge to the steadystate stock size

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