ABSTRACT
In the absence of complicating factors such as tax and depreciation rates, the real rate of interest will equal the marginal product of capital (MPK). If capital depreciates at the rate 8, MPK should (eventually) equal
0+ R. With a given production function linking output to capital, where the MPK is positive and declining, this condition will pinpoint a unique level of the capital stock. In the long run, consumption (c) should equal net product - that is output minus replacement investment (ok).
