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Econ:214 Intermediate Macroeconomics
Homework 7
Due Date: April 2, 2024
Problem 1. Suppose the government provides a recruiting service program that can reduce the cost of recruiting. Using the search model discussed in the class, determine the effects on the unemployment rate, the vacancy rate, the labour market tightness, the labour force and aggregate output. Use diagrams, and explain your results.
Problem 2. Consider the DMP search model of unemployment. Assume that legislators are contemplating about giving a subsidy s to any firm that hires a worker to reduce the economy’s unemployment rate. As a result, the firm’s surplus will change to z + s − w, while the total surplus to z + s − b. Draw the relevant diagrams and explain whether the policy would be successful.
Problem 3. During the Covid-19 pandemic, many governments imposed restrictions and temporarily shut down the economy causing the output gap to increase signif-icantly. Use the AD-AS model to analyze this outcome. At the same time, many central banks conducted an expansionary monetary policy. Evaluate this policy conse-quence. Draw the diagrams and explain your results.