Posted: November 26th, 2014

HW8 ;Macroeconomics, Charles I. Jones. Economic Crisis Update version or later

HW8 ;Macroeconomics, Charles I. Jones. Economic Crisis Update version or later

Project description

solve the question from the book:

Textbook: Macroeconomics, Charles I. Jones. Economic Crisis Update version or later (Version 2 and 3 are also fine).

1. In January 2010 there were 153 million workers in the labor market. This question asks you to think about how many jobs were missing during the recessions. If the unemployment rate in January 2010 was 5.5% instead of 9.7% how many more people would have been working? Is this a good measure for the number of jobs lost? What might be missing?
2. Consider the unemployment flow model developed in class where there is a unit mass of workers who can either be employed or unemployed. Therefore, we can denote the unemployment rate by u and the fraction of workers who are employed by 1— u, where 0 < u < 1. a. If unemployed workers find jobs in each period with probability f and employed workers lose their jobs with probability s, write down an equation for the change in unemployment in a given period. What is the steady state unemployment rate? b. Ifs = 0.03 and f = 0.5, what is the steady state unemployment rate? c. During the last recession there was a large decline in the job finding probability. What happens to the steady state unemployment rate if the job finding probability falls to 0.4? d. What would happen to the steady state unemployment rate if the job separation rate increased to 0.05 instead?
3. Consider the standard labor market model. Labor supply is given by Ls = a w + t and labor demand is given by LD = f — w. a. Solve for the equilibrium values of L* and w*. b. How does an increase in a influence the equilibrium values of L* and w*? Provide a two sentence of less explanation of the economic intuition for this result. c. Let a = 2, r = 1, and f = 10. What are the equilibrium values of L* and w*? d. Finally, using the parameters from (c) consider a minimum wage vT7 = 5. Under the minimum wage what is the new equilibrium level of unemployment L*? Is there an excess of labor supply? How much?

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