Compute the employment rate and the unemployment rate

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Consider now an economy where you need to search for a job. Let b be the fraction of people that do not have a job and are searching for one. Here active population and working age population do not coincide. Let s be the job separation. We call f the ending rate, conditional on searching for a job.

(a) Write the equations describing the dynamics of those employed (E) and those who are not employed (NE).

(b) Compute the employment rate and the unemployment rate in a Steady State. Explain how they are acted by the search rate b.

(b) Suppose that the working age population is 600 people, and that the ending rate is 5%, the separation rate is 2% and the search rate b is 10%. What is the unemployment rate?

(d) Suppose now that the search rate were 90%. What is now the employment and unemployment rate in this economy?

Reference no: EM13770381

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