Consider the following growth model and answer the questions below. S =I S = SY 0 0, FAL > 0, FKK 0 (6) A = gA 9 >0 Endogenous (6): I , S, Y , K' , L', A' Predetermined (3): K, L, A Initial Conditions (3): Ko, Lo, Ao Exogenous (5): n, g, s, S Compared to the model presented in class, this model adds technological improvement and depreciation. The variable A is the level of technology and the variable S is the rate at which capital depreciates. For example, 8 = .15 implies 15 percent of the existing capital stock will wear out over the next year. Y 1. Using the definitions k = and y = , show that equations (1)-(6) reduce to the two intensive form equations. y = f (k) k' = sy - [n + g + 8]k 2. Show in a diagram how an increase in the rate of depreciation affects the steady state levels for k and y