Suppose the government's goal is to reduce the unemployment rate. Some legislators propose that the government should give a subsidy s to any firm that hires a worker. Some other legislators argue that it would be more effective to simply pay consumers to stay home rather than searching for work, that is, anyone who chooses not to participate in the labor force should receive a payment q. Which policy is more effective in achieving the government's goal? Explain using the DMP model, with the aid of diagrams.
Answer to relevant QuestionsSuppose that there is technological change that reduces the cost of recruiting for firms. Using the DMP model, determine the effects on the unemployment rate, the vacancy rate, the labor force, the number of firms, aggregate ...In the Malthusian model, suppose that there is a technological advance that reduces death rates. Using diagrams determine the effects of this in the long-run steady state and explain your results.Consider a numerical example. In the Solow model, assume that n = 0, s = 0.2, d = 0.1, and F(K,N) = K0.3 N0.7. Suppose that initially, in period t = 0, z = 1 and the economy is in a steady state.(a) Determine consumption, ...Suppose, in the Solow growth model, that learning by doing is captured as a cost of installing new capital. In particular, suppose that for each unit of investment, r units of goods are used up as a cost to firms.(a) ...Consider the following effects of an increase in taxes for a consumer.(a) The consumer’s taxes increase by ∆t in the current period. How does this affect current consumption, future consumption, and current saving?(b) ...
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