Consider an economy where a fraction f of the unemployed find work every period, and a fraction
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Question:
Consider an economy where a fraction f of the unemployed find work every period, and a fraction s of the employed are separated from their jobs every period. Let U denote unemployment, E employment and L the fixed labour force.
a. Derive an expression for the unemployment rate, u = U/L, in the steady state.
b. Compute the unemployment rate when s = 0.01 and f = 0.15.
c. Suppose that f increases to 0.20. What happens to the unemployment rate? Interpret your results.
Related Book For
Macroeconomics
ISBN: 978-0321675606
6th Canadian Edition
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
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