Question

Consider a simple economy with search unemployment. The matching function is given by

*M* =
*eQ^(*1*/*2)*A^(*1*/*2)

There were initially *Q* = 1000 unemployed workers
looking for a job. Let *b* = 0*.*5, *z* = 1,
*k* = 0*.*1, *e* = 3*/*5 and *a*
= 0*.*5, where *k* is the cost of creating a
vacancy.

- Provide the expression for the Beveridge curve.
- Calculate and interpret the slope of the Beveridge curve for the current state of the economy.
- How does a decrease in the matching efficiency
*e*shift the beveridge curve? **Assume the government wants to implement a policy that will decrease the unemployment rate by 25%.**Compute the percentage change in*b*that will help reach this target.**Assume instead that the government wants to implement a policy that will increase the vacancy rate by 25%.**Compute the percentage change in*b*that will yield this new target.

Answer #1

Question 1
Consider the employment search model (in Macroeconomics)
If the matching function is given by:
M=5·A^0.25·Q^0.75
And the following values:
a=.5, Z=50, b=20, K =15
Find the unemployment rate.
Find the real wage.
Find GDP.
Question 2
Suppose the government introduces a benefit of $10,000 to be
paid to every adult, regardless of whether or not they seek
employment.
Using the search model, carefully explain how this will affect
the equilibrium wage rate, the unemployment rate, and GDP.
How...

Question 1
Consider the employment search model (in Macroeconomics)
If the matching function is given by:
M=5·A^0.25·Q^0.75
And the following values:
a=.5, Z=50, b=20, K =15
Find the unemployment rate.
Find the real wage.
Find GDP.
Question 2
Suppose the government introduces a benefit of $10,000 to be
paid to every adult, regardless of whether or not they seek
employment.
Using the search model, carefully explain how this will affect
the equilibrium wage rate, the unemployment rate, and GDP.
How...

1. The natural rate of unemployment is:
a. the unemployment rate at which the economy is producing its
potential GDP. b. usually equal to 3 percent. c. equal to the
seasonal unemployment. d. defined by the government. e. the
unemployment rate when none of the work force is unemployed for
more than six weeks.
2. If the economy is already producing at its potential,
_____.
a. the spending multiplier is less than 1/(1 - MPC) in the long
run b....

Assume that a country's economy run equilibrium and the actual
unemployment lower than the natural rate of unemployment
A)This economy is in what state
1 Where is the current output level, in relation to full
employment
2 is thete inflation in this economy Why or Why not
B)What open-market operation can the country's central bank use
to move the economy toward its long-run equilibrium
C)As a result of that action above what happens to the Money
Supply and equilibrium nominal...

2) Consider the following Keynesian model of the economy.
Consumption Function: C = 12 + .6 Y d,
Investment Function: I = 25 − 50 r,
Government Spending: G = 20,
Tax Collections: T = 20,
Money Demand Function: L d = 2 Y − 200 r,
Money Supply: M = 360,
Price Level: P = 2.
a) Find an expression for the IS curve and plot it.
b) Find an expression for the LM curve and plot it.
c)...

1. Which of the following accounts for a movement along
a given AD curve?
a. The substitution effect
b. The tax rate effect
c. The real-balance effect
d. The foreign aid effect
e. The government spending effect
2. If the nominal interest rate is 6.3 percent and the
inflation rate is 7.2 percent, then the real interest rate
equals:
a. - 13.5 percent
b. + 13.5 percent
c. - 0.9 percent
d. - 7.2 percent
e. + 1.1 percent
3....

1. In the short-run IS-LM model with income taxation, taxes are
given by ?=? +??. Suppose that MPC = 0.75 and the marginal tax rate
?=0.2. Then, when ? decreases by 1000, then for any given interest
rate, the IS curve shifts:
Select one:
a. to the left by 1000.
b. to the right by 3000.
c. to the right by 3750
d. to the right by 1875.
2.
Suppose that the adult population in an economy is 28 million,...

The crowding out effect is zero if
Select one:
a. the LM-curve is vertical
b. the central bank conducts open market sales following fiscal
expansion
c. income is stimulated via a tax cut rather than an increase in
government spending
d. the central bank conducts open market purchases following
fiscal expansion
e. the LM-curve is horizontal
An asset (other than money) is considered to be more liquid
if
Select one:
a. it can be quickly and cheaply transferred into money...

1.) True or False? For all societies, resources are scarce, and
technology is limited, while people’s wants and needs for goods and
services seem to be unlimited. (2 points)
2.) (1 point) Adam Smith’s “invisible hand” refers to a.) the
subtle and often hidden methods that businesses use to profit at
consumers’ expense. b.) the ability of free markets to reach
desirable outcomes, despite the self-interest of market
participants. c.) the ability of government regulations to benefit
consumers, even if...

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