Consider an economy with 500 people in the labor force. At the beginning of every month, 5 people lose their jobs and remain unemployed for exactly one month; one month later, they find new jobs and become employed. In addition, on January 1 of each year, 20 people lose their jobs and remain unemployed for six months before finding new jobs. Finally, on July 1 of each year, 20 people lose their jobs and remain unemployed for 6 months before finding new jobs. 1. What is the unemployment rate in this economy in a typical month? 2. What fraction of unemployment spells lasts for one month? What fraction lasts for six months? 3. What is the average duration of completed spell of unemployment? 4. On a particular date, what fraction of the unemployed are suffering a long spell (six months) of unemployment?

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Problem 3: Unemployment
Consider an economy with 500 people in the labor force. At the beginning of every month, 5 people lose
their jobs and remain unemployed for exactly one month; one month later, they find new jobs and
become employed. In addition, on January 1 of each year, 20 people lose their jobs and remain
unemployed for six months before finding new jobs. Finally, on July 1 of each year, 20 people lose their
jobs and remain unemployed for 6 months before finding new jobs.
1. What is the unemployment rate in this economy in a typical month?
2. What fraction of unemployment spells lasts for one month? What fraction lasts for six months?
3. What is the average duration of completed spell of unemployment?
4. On a particular date, what fraction of the unemployed are suffering a long spell (six months) of
unemployment?
Transcribed Image Text:Problem 3: Unemployment Consider an economy with 500 people in the labor force. At the beginning of every month, 5 people lose their jobs and remain unemployed for exactly one month; one month later, they find new jobs and become employed. In addition, on January 1 of each year, 20 people lose their jobs and remain unemployed for six months before finding new jobs. Finally, on July 1 of each year, 20 people lose their jobs and remain unemployed for 6 months before finding new jobs. 1. What is the unemployment rate in this economy in a typical month? 2. What fraction of unemployment spells lasts for one month? What fraction lasts for six months? 3. What is the average duration of completed spell of unemployment? 4. On a particular date, what fraction of the unemployed are suffering a long spell (six months) of unemployment?
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Consider an economy with 500 people in the labor force. At the beginning of every month, 5 people lose
their jobs and remain unemployed for exactly one month; one month later, they find new jobs and
become employed. In addition, on January 1 of each year, 20 people lose their jobs and remain
unemployed for six months before finding new jobs. Finally, on July 1 of each year, 20 people lose their
jobs and remain unemployed for 6 months before finding new jobs.
1. What is the unemployment rate in this economy in a typical month?
2. What fraction of unemployment spells lasts for one month? What fraction lasts for six months?
3. What is the average duration of completed spell of unemployment?
4. On a particular date, what fraction of the unemployed are suffering a long spell (six months) of
unemployment?

plz solve part 4 ? Thanks. 

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Follow-up Question

can you plz complete the last part? Thanks :)

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