Question: Show that in the Keynesian DMP model if the wage

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.

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  • CreatedDecember 05, 2014
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