Consider the simple model of labor market flows with the unemployment rate following U;41 = (1 – fu, + s(1 – u,), constant job separation rate s = 0.03 per month and constant job finding rate f = 0.40 per month. Which of the following is false? The half-life of a shock to unemployment is about 2 months. O The expected duration of an unemployment spell is about 2.5 months. The steady state unemployment rate is approximately 7%. The expected duration of an employment spell is about 2.77 years.
Consider the simple model of labor market flows with the unemployment rate following U;41 = (1 – fu, + s(1 – u,), constant job separation rate s = 0.03 per month and constant job finding rate f = 0.40 per month. Which of the following is false? The half-life of a shock to unemployment is about 2 months. O The expected duration of an unemployment spell is about 2.5 months. The steady state unemployment rate is approximately 7%. The expected duration of an employment spell is about 2.77 years.
Chapter6: Business Cycles And Unemployment
Section: Chapter Questions
Problem 6SQP
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Transcribed Image Text:Consider the simple model of labor market flows with the unemployment rate following
U+1 = (1 – fu, + s(1 – u,), constant job separation rate s = 0.03 per month and constant job
finding rate f = 0.40 per month. Which of the following is false?
The half-life of a shock to unemployment is about 2 months.
The expected duration of an unemployment spell is about 2.5 months.
The steady state unemployment rate is approximately 7%.
O The expected duration of an employment spell is about 2.77 years.
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