Dynamic General Equilibrium Model 1. Consider a positive capital depreciation rate > 0. In this case,...

 

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Dynamic General Equilibrium Model 1. Consider a positive capital depreciation rate > 0. In this case, the asset-accumulation equation becomes Kt (R-8) Kt + WtL - Ct = = Show that the optimal consumption path is given by Ċt Ct = Rt-8-p and that the steady-state equilibrium levels of {K*, Y*, I*, C*} are given by 1/(1-a) A L K* = -(0446) Y* = A(K*)ª L¹-a = (a4 I* = 8K* : = a A p+8. A a/(1-a) - = C* = Y* I* _P+(1-a)s p+8 1/(1-a) SL AL a/(1-a) a A (46) " AL Dynamic General Equilibrium Model 1. Consider a positive capital depreciation rate > 0. In this case, the asset-accumulation equation becomes Kt (R-8) Kt + WtL - Ct = = Show that the optimal consumption path is given by Ċt Ct = Rt-8-p and that the steady-state equilibrium levels of {K*, Y*, I*, C*} are given by 1/(1-a) A L K* = -(0446) Y* = A(K*)ª L¹-a = (a4 I* = 8K* : = a A p+8. A a/(1-a) - = C* = Y* I* _P+(1-a)s p+8 1/(1-a) SL AL a/(1-a) a A (46) " AL