This question examines the Diamond-Mortensen Pissarides model of search and unemployment seen in class. Recall that the two equations determining equilibrium in this model are given by: v(Q)= b + em(1,j) a ( z-b) and em (1/j,1) = k/(1-a)(z-b) Draw and carefully label the two graphs depicting equilibrium in the model. Suppose that there is a technological change that reduces the costs of recruiting for 1. 2. firms. Use the DMP model to determine the effects on: i. Labour market tightness ii. Labour force iii. The unemployment rate iv. The vacancy rate V. The number of firms vi. Aggregate output

This question examines the Diamond-Mortensen Pissarides model of search and unemployment seen in class. Recall that the two equations determining equilibrium in this model are given by: v(Q)= b + em(1,j) a ( z-b) and em (1/j,1) = k/(1-a)(z-b) Draw and carefully label the two graphs depicting equilibrium in the model. Suppose that there is a technological change that reduces the costs of recruiting for 1. 2. firms. Use the DMP model to determine the effects on: i. Labour market tightness ii. Labour force iii. The unemployment rate iv. The vacancy rate V. The number of firms vi. Aggregate output

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth

Section: Chapter Questions

Problem 10SQP

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