4. Let u denote the unemployment rate, f the job finding rate, and s the separation rate. The law of motion for th unemployment rate is (where Au = Ut+1 − Ut is the change in the unemployment rate): d. Au fu + s(1 – u). = Au = fu-s(1 – u). Au = suf(1-u). Aus(1u) - fu. e. Au = su + f(1 – u). a. b. C.
4. Let u denote the unemployment rate, f the job finding rate, and s the separation rate. The law of motion for th unemployment rate is (where Au = Ut+1 − Ut is the change in the unemployment rate): d. Au fu + s(1 – u). = Au = fu-s(1 – u). Au = suf(1-u). Aus(1u) - fu. e. Au = su + f(1 – u). a. b. C.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I need help of question 4 with detail explanation
Transcribed Image Text:3. We study the effects of changes in labor productivity on the labor market in the long run in the context of the
Mortensen-Pissarides model. For simplicity, unemployment benefits are set to b=0. In the long run, wages
and recruiting costs are proportional to labor productivity: w = By and kcy where b and c are two
with y.
positive real numbers. Equilibrium market tightness
Does not vary; does not vary
with y and the unemployment rate
Increases; Does not vary
with
d.
a.
4.
b.
C.
Increases; Decreases
a.
b.
C.
Decreases; Increases
e.
Let u denote the unemployment rate, fthe job finding rate, and s the separation rate. The law of motion for the
unemployment rate is (where Au = Ut+1 - ut is the change in the unemployment rate):
d.
= fu + s(1-u).
Au =
Au = su + f(1 – u).
e.
Au = fu-s(1 - u).
Au = suf(1 - u).
Au =
s(1-u) - fu.
Does not vary; Increases
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