Show that, in the Keynesian DMP model, if the wage is judged to be inefficiently high, so that unemployment is inefficiently high, the government can pay a subsidy to firms that corrects the problem. Explain your results. Does it matter whether the government subsidizes firms that post vacancies or only successful matches? Discuss.
Answer to relevant QuestionsSuppose that all social programs simultaneously become more generous. In particular suppose that there is an increase in UI benefits, and also an increase in welfare benefits, which are represented in the DMP model as ...Modify the Solow growth model by including government spending as follows. The government purchases G units of consumption goods in the current period, where G = gN and g is a positive constant. The government finances its ...If total factor productivity decreases, determine using diagrams how this affects the golden rule quantity of capital per worker and the golden rule savings rate. Explain your results.Suppose there are two countries. In the rich country, the representative consumer has Hr units of human capital, and total factor productivity is zr. In the poor country, the representative consumer has Hp units of human ...A consumer receives income y in the current period, income y' in the future period, and pays taxes of t and t' in the current and future periods, respectively. The consumer can lend at the real interest rate r. The consumer ...
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