Question

3. Assume that the unemployment dynamics in the U.S. are represented by the following equations: LF...


3. Assume that the unemployment dynamics in the U.S. are represented by the following equations:

LF = U + E

ΔU = s(E) – f(U),

Where LF stands for Labor Force, s is the separation rate (the rate at which those employed separate from their jobs), and f is the finding rate (the rate at which those unemployed find a new job). Assume that LF = 1,000. Separation rate (s) = 5%, and finding rate (f) = 4%. Solve the aforementioned system for the Steady-State values of E (number of employed) and U (number of unemployed). In the Steady State ΔU=0. Show your work.

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