Question

Outline a basic model of the natural rate of unemployment. Suppose that the government wants to...

  1. Outline a basic model of the natural rate of unemployment. Suppose that the government wants to introduce the following policy: on top of unemployment benefits the unemployed receive a bonus for finding new jobs; the amount of the bonus declines with the duration of search. In the context of the model you have outlined explain the main effects of the proposed policy.

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